Compensation Gains, Slightly Offset Decline in Unit Labor Costs
Nonfarm business sector labor productivity increased solidly at 3.4% in the first quarter (Q1) of 2019, meeting a strong consensus forecast. The gain reflects a 3.9% increase in output and a 0.5% increase in hours worked.
|Indicator||Prior||Consensus Forecast||Forecast Range||Actual|
|Labor Productivity – Q/Q ∆ – SAAR||3.6%||3.4%||3.4% to 3.6%||3.4%|
|Labor Costs – Q/Q ∆ – SAAR||-0.9%||-0.8%||-1.4% to -0.3%||-1.6%|
From Q1 2018 to Q1 2019, productivity rose 2.4%, fueled by a 3.9% increase in output and a 1.5% increase in hours worked. The four-quarter increase in productivity is the largest since a 2.7% gain in the Q3 2010.
Unit labor costs in the nonfarm business sector fell 1.6% in Q1 2019, and has declined by 0.8% over the last four quarters. That’s the lowest four-quarter rate since a 1.7% decline in Q4 2013.
While compensation continued to rise, it only helped to offset output.
Unit labor costs is calculated as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, while increases in output per hour tend to reduce them.