2017 Economic Calendar
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Productivity and Costs  
Released On 5/4/2017 8:30:00 AM For Q1(p):2017
PriorPrior RevisedConsensusConsensus RangeActual
Nonfarm productivity - Q/Q change - SAAR1.3 %1.8 %0.0 %-0.4 % to 0.5 %-0.6 %
Unit labor costs - Q/Q change - SAAR1.7 %1.3 %3.0 %

It took more hours to produce at a slower rate in the latest quarter in what is yet another unfavorable productivity report. Nonfarm productivity fell at an annualized 0.6 percent in the first quarter which is just below Econoday's low estimate. Weak productivity raises the cost of labor which came in well above expectations at an annualized 3.0 percent.

Output growth rose a modest 1.0 percent in the quarter while hours worked rose a less modest 1.6 percent. Compensation rose at a 2.4 percent rate though, after adjustment for inflation, actually contracted 0.8 percent. This follows no change for the price-adjusted reading in the fourth quarter and is another indication of wage weakness.

Looking at year-on-year data, productivity was up 2.4 percent from the first quarter last year which again is below labor costs which were up 2.8 percent. The breakdown shows a 1.3 percent rise in hours worked that is a mismatch with a 3.9 percent rise in compensation.

Weak productivity reflects lack of investment in new equipment along with lack of skills in the labor force. Weak productivity also holds down wages, and whether wages can recover from a weak March will be a major topic in tomorrow's employment report for April.

Consensus Outlook
Weak first-quarter GDP points to weak productivity, at a consensus no change and a resulting increase for unit labor costs where the consensus is 2.7 percent. Weak productivity, reflecting lack of investment in new equipment but also lack of skill in the labor force, has been the Achilles heel of the expansion.

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

2017 Release Schedule
Released On: 2/23/85/46/58/99/711/212/6
Release For: Q4(p):2016Q4(r):2016Q1(p):2017Q1(r):2017Q2(p):2017Q2(r):2017Q3(p):2017Q3(r):2017

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