NONFARM PRODUCTIVITY UP 2.2% IN Q2— MANUFACTURING PRODUCTIVITY FALLS
Nonfarm productivity rose 2.2% in the second quarter, slightly less than analysts expected and slightly below the revised first quarter growth rate of 2.6%. It is the second quarter in a row productivity growth above 2%, despite relatively weak GDP growth. While anemic economic activity kept nonfarm output growth at 1.7%, businesses trimmed the number of hours needed to produce that output by 0.5%.
Unit labor costs of nonfarm businesses rose 1.3% in the second quarter following a revised 2.5% increase in the first quarter of the year. That is an improvement compared with the average growth rate of almost 3% in 2006 and 2007. That partly reflects a slowdown in compensation growth during the second quarter, up 3.6% compared with its 5.2% increase during the first quarter.
Manufacturing productivity fell 1.4% in the second quarter, its first decline since 2006 and its largest decline since 2003. Most of the productivity decline was in durable goods production where productivity fell 3.5%, its larges decline since 1990. Both manufacturing output and hours declined but output, down 3.5%, declined at a faster rate than hours. The decline in manufacturing productivity caused a large increase in unit labor costs, up 6.1%, its largest increase since late 2006.
On a year-over-year basis, nonfarm productivity is up 2.8% on a 1.8% increase in output and a decline in hours during the past year. Despite the quarterly decline, manufacturing productivity is up 2.6% from year earlier numbers as output was virtually unchanged and hours in manufacturing declined. Nonfarm unit labor costs rose 1.5% from Q2 2007.