Second Quarter 2017 Revised Productivity

After more complete data were collected, it now appears America was more productive than first estimated from April through June of 2017.  New estimates from the Bureau of Labor Statistics indicate productivity increased 1.5 percent, upwardly revised from 0.9 percent; this is a stark contrast to the first quarter’s productivity gain of just 0.1 percent.  Additionally, unit labor costs (ULC) grew slower than initially counted, rising just 0.2 percent versus 0.6 percent in the prior release.

Output grew faster than earlier estimates suggested while labor hours were unchanged in the revised report.  On an annualized basis, output grew 4.0 percent in the second quarter (revised upward from an already impressive 3.4 percent).  This added output required 2.5 percent additional labor hours, yielding the 1.5 percent productivity gain mentioned above.

Unit labor costs grew at a slower pace than first counted.  Reflecting a 1.8 percent gain in hourly compensation and a 1.5 percent gain in productivity, ULC ticked higher by just 0.2 percent.  In the past year, employers have benefited from productivity gains outpacing compensation growth as ULC has declined 0.2 percent in the past twelve months.  

America’s current expansion continues lacking the type of productivity gains experienced in some of the recent, pre-financial crisis expansions.  On a year-over-year basis, it has not reached 2.0 percent since the third quarter of 2010, a level hit with some regularity in the prior two economic upswings. Nonetheless, the year ago trend is the highest in two years, so productivity is making progress even if it is far from perfection.