Q3 Productivity & Costs: Productivity Improves, Labor Costs Rise
December 6, 2016
Bottom Line: Productivity increased in 2016 Q3 after three consecutive quarterly declines. With productivity unrevised at 3.1%, output was revised up to 3.6% and hours worked increased 0.5%. Compensation has been volatile but with positive revisions to the 3rd Quarter data, the trend now shows unit labor cost growth and overall compensation accelerating modestly. Nonfarm Business Productivity was Unchanged and increased by 3.1% in 2016 Q3, compared with market expectations for a slightly in line upward revision to an increase of 3.3%. This revision left the year-on-year growth rate of labor productivity at 0.0%. Output was revised modestly higher, from 3.4% to 3.6%, reflecting the recent upward adjustment in 2016 Q3 nonfarm business GDP. Hours Worked was revised up to 0.5% from 0.3%, reflecting the recent revisions to employment. Compensation was revised modestly higher, from 3.4% to 3.8%. Over the past year, compensation has risen by 3.0%. As a result of these adjustments, Unit Labor Costs were REVISED UP from 0.3% to 0.7%. Over the past year, unit labor costs have increased by 3.0%.
Article by Contingent Macro Advisors