Revised Second Quarter 2018 Productivity and Unit Labor Costs

With more complete data collected, the Bureau of Labor Statistics (BLS) revised their second quarter of 2018 report on Productivity and Unit Labor Costs.  However, the revisions were minor.  Productivity remained at 2.9 percent from April through June, up from 0.4 percent in the first three months of the year, and is the largest quarterly gain since the first quarter of 2015 (3.1 percent).

Both components of productivity were upwardly revised.  The BLS estimates output grew 5.0 percent versus 4.9 percent in the first count­­­—the largest since the third quarter of 2014 (6.4 percent).  Additionally, hours worked were slightly higher than first tallied, upwardly revised to 2.0 percent from an original estimate of 1.9 percent.

Wages have a positively correlated impact on prices paid by consumers; when wages rise, prices tend to follow suit, and pay rose 1.9 percent in the quarter.  Fortunately, improving productivity figures offset this impact as workers produced more per labor hour, pushing labor associated expenses lower.  Unit labor costs dropped 1.0 percent (initially 0.9 percent) because productivity gains improved faster than compensation increases. 

Second quarter productivity and unit labor costs were positive.  An impressive period of growth improvement helped this indicator, but labor and capital combined to keep costs down.  This combination is constructive for the economy because such efficiency supports competitive pricing, leading to added consumption which in turn supports jobs growth.  America’s economy is moving along nicely.