Q2 US Labor Productivity Growth Report

The labor department on Thursday released a report on the US labor productivity for the second quarter 2017 (Q2 2017) and the actual figures were slightly higher than estimates for the period. Also, in addition to the above, the unit labor cost rose by less than initially expected. So, getting down to business, the productivity rose by 1.5 percent annualized rate. However, it should be noted that the initial figure reported was at 0.9 percent increase but was upwardly revised to 1.5 percent due to greater output spikes than initially estimated, which saw output spike by up to 4.0 percent while increase in hours worked was unchanged at 2.5 percent (NB: All quarterly percent changes in this release are seasonally adjusted annual rates.)

This represents a significantly higher acceleration from the 0.1% growth seen in the first quarter.

The unit labor cost on the other hand saw a modest increase of 0.2 percent during the quarter, revised downward from the 0.6 percent initially reported. This represents a reduction of 4.6 percent labor cost seen in the first quarter of 2017 (spike of 4.8 percent). The reduced labor cost was mainly driven by a stronger than initially estimated productivity growth as output surged by 4.0 percent (higher by 0.6 percent from the initial estimate of 3.4 percent) while increase in hours worked was unchanged at 2.5 percent. Hourly compensation on the other hand was upwardly revised to 1.8 percent from an initial 1.6 percent while real hourly compensation, which takes changes in consumer prices, increased by 2.1 percent compared to an initial estimate of 1.9 percent. This indicates that wage growth remains sluggish even as the labor market grows towards full employment.

When comparing Q2 2017 with the same quarter of the previous year (Q2 2016), productivity was up by 1.3 percent, output climbed by 2.8 percent and hours worked increased by 1.5 percent. Labor costs on the other hand was down by 0.2 percent as a result of productivity growth offsetting a 1.1 percent increase in hourly compensation.