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2008 Economic Calendar |
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Resource Center » U.S. & Intl Recaps | Release Dates | Why Investors Care | Today's Calendar
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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
| Released on 2/2/06 For Q4 2006 | |||||||||||||||||||||||||
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Highlights
Fourth-quarter productivity growth fell an annualized 0.6 percent, after a 4.5 percent boost in the third quarter. The fourth quarter was the first decline since the first quarter of 2001 and the largest drop since the third quarter of 2000. Unit labor costs rebounded an annualized 3.5 percent, following a 0.5 percent dip in the third quarter. Year-on-year rates show the fourth quarter's productivity at 2.3 percent, compared to unit labor costs at 1.0 percent year-on-year.
The consensus expected a 1.7 percent annualized rise in nonfarm productivity and a 2.8 percent annualized increase in unit labor costs.
Quarter-to-quarter output edged up an annualized 0.9 percent in the fourth quarter, following a 4.7 percent boost in the prior quarter. Hours worked rose an annualized 1.5 percent in the fourth quarter, following 0.1 percent annualized in the third quarter.
Real compensation (adjusted for inflation) slipped 0.4 percent, following a 1.0 percent drop in the third quarter. The year-on-year rate is up only 1.2%, well below any common measure of inflation.
A bright spot in today's report was a hefty 8.2 percent jump in durables manufacturing productivity, after 6.7 percent in the third quarter.
Productivity numbers can be quite volatile on a quarterly basis. Temporary swings in output can have a significant impact on the numerator portion of productivity calculations (output divided by labor input) even though there may be no underlying change in the efficiency of labor. The real issues are the underlying trends for output growth relative to labor time and labor costs. At this point, GDP still appears to be on a moderately healthy path and labor costs are still subdued.
Nonfarm productivity increased at a 4.7 percent rate in the third quarter, at the same time that unit labor costs fell at a 1 percent rate. Productivity depends on output growth and employment gains. With GDP expected to grow more slowly in the fourth quarter than in the third quarter, productivity growth is likely to be more moderate as well.
Nonfarm productivity Consensus Forecast for Q4 05: 1.7 percent rate
Range: -1.0 to 2.9 percent rate
Unit labor costs Consensus Forecast for Q4 05: 2.8 percent rate
Range: 0.6 to 4.5 percent rate
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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. |
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