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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
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Highlights
Productivity and labor costs for the second quarter showed modest improvement but not as much as expected. Second quarter productivity posted a 1.8 percent annualized increase, up from 0.7 percent in the first quarter. The second quarter gain was below the market consensus projection for a 2.1 percent annualized boost. The faster growth in productivity reflected a jump in output which outpaced an increase in hours worked. For the second quarter, output rose an annualized 4.2 percent after a 0.3 percent increase in the prior quarter. Meanwhile, hours worked rebounded 2.3 percent annualized, following a 0.3 percent dip in the first quarter. Year-on-year, productivity edged up to up 0.6 percent in the second quarter from up 0.4 percent the prior quarter.
Unit labor costs moderated somewhat, rising 2.1 percent annualized in the second quarter, following a 3.0 percent increase in the first quarter. The consensus had expected a 1.6 percent rise in unit labor costs for the second quarter. Year-on-year, unit labor costs in the second quarter stood at up 4.5 percent, compared to up 3.7 percent in the prior quarter.
Compensation growth firmed a little in the second quarter with a 3.9 percent annualized advance, following a 3.7 percent increase in the first quarter. Year-on-year, compensation stands at up 5.2 percent, compared to up 4.1 percent in the first quarter. While productivity improved in the second quarter along with labor costs, the Fed will likely take the long view that year-on-year, unit labor costs and compensation are still on the high side. Today's report may lead the FOMC to leave its anti-inflation bias in place for this afternoon's FOMC statement.
Nonfarm productivity rose an annualized 1.0 percent in the first quarter - low pace held down by the first quarter's weak output. Second quarter productivity should be up, reflecting stronger GDP growth. Unit labor costs were better behaved in the first quarter with a 1.8 percent rise, following an 8.9 percent spike in the fourth quarter. The Fed certainly will be reviewing this report Tuesday morning before the FOMC votes on monetary policy later in the day.
Nonfarm Productivity Consensus Forecast for initial Q2 07: +2.1 percent
Range: +1.4 to +3.0 percent
Unit Labor Costs Consensus Forecast for initial Q2 07: +1.6 percent rate
Range: +0.5 to +3.0 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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