Productivity and Unit Labor Cost 3rd Quarter 2017
Submitted by Atlas Indicators Investment Advisors on November 9th, 2017America’s productivity jumped from July through September of 2017 according to data from the Bureau of Labor Statistics (BLS). Output-per-labor-hour increased 3.0 percent on an annualized basis, doubling the prior quarter’s pace. This jump is the best quarterly improvement since the third quarter of 2014. Additionally, unit labor costs rose as employee compensation increased faster than productivity’s uptick.
Productivity is calculated using two components, and each of them improved in the period. First, nonfarm output rose 3.8 percent on an annualized basis during the quarter. Second, this growing production only required an additional 0.8 percent increase in labor hours. During the twelve months ending in September, productivity improved 1.5 percent as output grew 2.9 percent and hours worked increased 1.4 percent.
Unit labor costs are also included in this BLS release. This figure is a comparison of hourly compensation growth and the aforementioned labor productivity. Hourly compensation grew 3.5 percent in the third quarter. Since compensation grew faster than productivity (+3.0 percent), unit labor costs increased. While this most recent rise of 0.5 percent was greater than in the second quarter, it is not an alarming uptick. Nonetheless, labor represented a larger portion of the costs associated with producing goods and services than before.
These most recent figures on productivity and unit-labor-costs add to the recent constructive news regarding the American economy. Consumption continues growing (retail sales), jobs are being added each month(employment figures), firms seem to be increasing their capital investment (core durable goods orders), and now productivity is heading up. America’s economy has more strong characteristics than weak ones at this time.