The report on second-quarter productivity and unit labor costs is out from the Labor Department after last week’s surprise nonfarm payrolls gains. Productivity (hourly output) rose by 1.6% versus -0.5% in the first quarter, and that was higher than the 1.3% gain that Dow Jones was calling for. Unit Labor costs (wage inflation) rose by 1.7% after the first quarter’s revision to +5.6%. Dow Jones was calling for a gain of only 0.6% on the cost basis for the second quarter.
Expectations from Bloomberg were +1.3% on the productivity measure and +0.9% on the unit labor cost measurement. Hourly compensation grew at a faster rate than productivity. Has America milked the last ounce of productivity per cost? While the United States added 163,000 in last week’s jobs report in the second quarter, the unemployment rate did officially tick up by 0.1% to 8.3% in the quarter.
In today’s report, nonfarm business output rose by 2.0% in the second quarter, lower than the 2.7% gain in the first quarter. The hours worked rose by 0.4% in the second quarter, versus 3.2% higher in the first quarter. These modest gains are also largely reflected in that low GDP growth of 1.5% we saw on a preliminary GDP basis as well.
JON C. OGG
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