2012 Economic Calendar
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Productivity and Costs  
Released On 8/8/2012 8:30:00 AM For Q2(p):2012
PriorPrior RevisedConsensusConsensus RangeActual
Nonfarm productivity - Q/Q change - SAAR-0.9 %-0.5 %1.3 %0.9 % to 2.9 %1.6 %
Unit labor costs - Q/Q change - SAAR1.3 %5.6 %0.9 %-0.5 % to 2.0 %1.7 %

Productivity growth for the second quarter improved despite a slowing in output. Nonfarm business productivity rebounded an annualized 1.6 percent from a 0.5 decline in the prior quarter. Expectations were for a 1.3 percent rise for the second quarter. Unit labor costs decelerated to 1.7 percent annualized, following a 5.6 percent increase in the first quarter. The consensus projected a 0.9 percent rise.

The rise in second quarter productivity reflected a 2.0 percent gain in output after a 2.7 percent boost in the first quarter. But the key factor was a slowing in hours worked to a 0.4 percent rise in the second quarter from 3.2 percent in the first.

Unit labor costs slowed on a 3.3 percent gain in compensation after a 5.1 percent spike in the first quarter. The first quarter surge may have been due to one-time bonuses.

Today's report includes annual revisions to prior data.

Year-on-year, productivity was up 1.1 percent in the second quarter, following 1.0 percent the quarter before. Year-ago unit labor costs were up 0.8 percent, compared to unchanged in the first quarter. Compensation gained 1.9 percent versus 1.0 percent in the first quarter year-on-year.

What do the numbers suggest for any improvement in the labor market? You can get more than one view on this. One view is that businesses have squeezed labor costs all that is possible and that companies must hire to do more business. A competing view is that demand (output) is still too sluggish and improvement in job gains will not take place until demand is up. The truth is probably somewhere in between, still leaving job growth lackluster in the near term.

Consensus Outlook
Nonfarm business productivity declined an annualized 0.9 percent in the first quarter, compared to the initial estimate of a 0.5 percent dip and compared to a 1.2 percent rise in the prior quarter. Unit labor costs were revised down to an annualized 1.3 percent increase versus the first estimate of 2.0 percent, and following a 1.5 percent decrease in the fourth quarter. Productivity was nudged lower primarily on slower output growth. Output in the first quarter was revised down to a 2.4 percent rise versus the initial estimate of 2.7 percent and the fourth quarter gain of 3.7 percent. Unit labor costs were revised down on compensation which grew only 0.4 percent instead of the first estimate of 1.5 percent annualized. More recently, productivity may not be as healthy and unit labor costs may be up as second quarter GDP posted at an annualized 1.5 percent, down from the first quarter rate of 2.0 percent. Output numbers for productivity closely track GDP.

Productivity measures the growth of labor efficiency in producing the economy's goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends.  Why Investors Care
Nonfarm productivity growth has remained healthy during this expansion, but it has prevented employment from growing very fast and this hurt income growth to some extent. Unit labor costs tend to fall when productivity growth accelerates and then rises as productivity growth abates.
Data Source: Haver Analytics

2012 Release Schedule
Released On: 2/23/75/36/68/89/511/112/5
Release For: Q4(p):Q4(r):Q1(p):Q1(r):Q2(p):Q2(r):Q3(p):Q3(r):

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