Productivity: Better Than Expected But Likely To Be Revised
May 7, 2020
Bottom Line: Productivity was better than expected as hours worked and unit labor costs were stronger than expected. Unit labor costs were up sharply, while hours worked fell sharply. Non-labor costs plunged. However, the BLS noted that it estimated several figures to adjust for job losses due to the shutdowns for the novel coronavirus. Still, this was the largest decline in productivity since 4Q15 and will likely be revised lower. Nonfarm Business Productivity FELL by 2.5% in 2020 Q1, compared with market expectations for a decrease of 5.5%. Productivity is now 0.3% ABOVE its year-ago level. Output FELL by 6.2%, in line with the Q1 decline in nonfarm business GDP. With its recent losses, output is now 0.1% ABOVE its year-ago level. Hours Worked FELL by 3.8%. Hours worked are now 0.2% BELOW their year-ago level. Compensation ROSE by 2.2% and is now 1.7% ABOVE its year-ago level. Quarterly compensation has been quite volatile in recent years but the trend turned higher in 2017. Unit Labor Costs ROSE by 4.8%, compared with market expectations for an increase of 4.5%. Unit labor costs are now 1.5% ABOVE their year-ago level.
Article by Contingent Macro Advisors