Less Productive

Normally around this time in February, the Bureau of Labor Statistics (BLS) releases information on our nation’s Productivity and Unit Labor Costs from the fourth quarter of the prior year.   Not this time.  With another government shutdown already looming, economic data continues suffering from the last time portions of the federal budget went unfunded.  In the meantime, we’ll look at the data they could hobble together and see if there’s any sense to be made.

Manufacturing data was collected, so that’s what we’ll look at today.  While it is not optimal to be missing large portions of information in an indicator, the manufacturing segment of output tends to be sensitive to the business cycle, so we’ll use it to clue us in as to whether overall output is slowing or accelerating.

Manufacturing output decelerated but productivity improved.  The BLS has an estimate for our nation’s output growth which is sort of like gross domestic product, and it is broken down into sub-components like manufacturing.  This factory segment of our economy improved 2.3 percent from October through December, but that is much slower than the 4.2 percent gain in the third quarter of last year.  However, it only required labor hours to increase by 1.0 percent in order to accomplish the rising output, so productivity gained 1.3 percent.  In the third quarter, the increased manufacturing output needed hours worked to increase by 3.1 percent, so third-quarter productivity only managed a 1.1 percent gain.  To summarize: the signals are mixed.

A less productive BLS makes it more challenging to describe the economy.  As we move further away in time from the last government shutdown, this should get easier because data feeds will begin normalizing.  However, if the leaders in Washington D.C. don’t act fast, we could be halfway through the year or later before a clear picture emerges.