Q2 Productivity & Costs: Revised Up Less Than Expected, Trend Slumping

December 10, 2019
Bottom Line: Productivity was revised up less than expected in the final reading for 3rd Quarter 2019. Meanwhile, unit labor costs were modestly lower than previously estimated. These revisions reflect the recent adjustments to Q3 GDP, payroll employment, the workweek, and wages and salaries. Given the current modest rate of the economic growth, productivity is increasing modestly while unit labor costs are rising modestly with the trend in both decelerating. Nonfarm Business Productivity was REVISED UP by 0.1 percentage points, falling by 0.2% in 2019 Q3, compared with market expectations for an upward revision to a decline of 0.1%. This revision lifted the year-on-year growth rate of labor productivity at 1.5%. Output was revised modestly higher, from 2.1% to 2.3%, reflecting the recent adjustment in 2019 Q3 nonfarm business GDP. Hours Worked was revised up to 2.5% from 2.4%, reflecting the recent revisions to employment. Compensation was revised modestly lower, from 3.3% to 2.3%. Over the past year, compensation has risen by 3.7%. As a result of these adjustments, Unit Labor Costs were REVISED DOWN from 3.6% to 2.5%. Over the past year, unit labor costs have increased by 2.2%.