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Final Q3 Non-Farm Productivity rose 1.3%, more than expected, although both hours and output were downwardly adjusted. This followed a preliminary reading of a 1.1% rise and a Q2 reading of a 3.6% increase.

Output declined 1.9% from a 1.7% drop in the preliminary data, still the biggest fall since Q3 2001. Output rose 2.8% in Q2. Meanwhile, hours fell 3.1% from a 2.7% decline in the preliminary data — still the biggest drop since Q1 2002. Hours had dipped 0.8% in Q2.

Hourly compensation increased 4.1% (from a 4.7% rise preliminary), resulting in a 2.8% rise in unit labor costs (from 3.6% preliminary). Y-o-Y, unit labor costs were up 1.4%.

Manufacturing productivity dropped a record 2.7%, with hours tumbling 5.3% and output plunging 7.8%, the most since Q1 1991. Manufacturing unit labor costs rose 7.6%.

• Final Q3 Non-Farm Productivity is expected to be revised down to 0.8% from the 1.1% reported in the preliminary data

• Final Q3 Unit Labor Costs are expected to be revised down to 3.5% from the 3.6% reported in the preliminary data

Final Q3 Non-Farm Productivity is expected to be revised lower as expected declines in output growth are likely to outpace expected downward revision to compensation growth. Output growth is expected to be revised lower to -1.9% from -1.7% reflecting downward revisions to the preliminary Q3 GDP report. Compensation growth is also expected to be revised down to 4% from the surprising 4.7% reported in the preliminary data.

The hours worked competent is expected to be left unchanged from the 2.7% decline reported in the preliminary data—which was the largest drop since Q1 ’02. Q3 Unit-Labor-Costs are expected to be revised marginally lower to 3.5% from the 3.6% reported prior.

• Final Q3 Non-Farm Productivity is expected to be revised down to 0.8% from the 1.1% reported in the preliminary data

• Final Q3 Unit Labor Costs are expected to be revised down to 3.5% from the 3.6% reported in the preliminary data

Final Q3 Non-Farm Productivity is expected to be revised lower as expected declines in output growth are likely to outpace expected downward revision to compensation growth. Output growth is expected to be revised lower to -1.9% from -1.7% reflecting downward revisions to the preliminary Q3 GDP report. Compensation growth is also expected to be revised down to 4% from the surprising 4.7% reported in the preliminary data.

The hours worked competent is expected to be left unchanged from the 2.7% decline reported in the preliminary data—which was the largest drop since Q1 ’02. Q3 Unit-Labor-Costs are expected to be revised marginally lower to 3.5% from the 3.6% reported prior.

Non-Farm Productivity rose 1.1% in Q3, higher than expected but on the back of the worst output and hours data in roughly 7 years.

That followed a downwardly revised 3.6% increase in Q2 (previously reported as up 4.3%). Q3 output fell 1.7%, the most since Q3 2001, and hours declined 2.7%, the biggest drop since Q1 2002. Y-o-Y, Non-Farm Productivity was up 2%.

Hourly compensention increased 4.7%, sending unit labor costs up 3.6%, the highest since Q4 2007. Y-o-Y, unit labor costs have risen 2.3%.

Manufacturing productivity fell 1% in Q3 after a 1.9% decline prior. Output tumbled 5.8% — the most since Q3 2001 — and hours dropped 4.9%, their worst performance since Q3 2003. A 5% jump in hourly compensation contributed to manufacturing unit labor costs rising 6.1%.

• Q3 Non-Farm Productivity is expected to rise 0.8% following a 4.3% increase in Q2
• Unit Labor Costs are expected up 3.2% after a 0.5% decline prior
• Output growth is expected to fall 2.5% after a 3.4% increase in Q2

Productivity was pressured later in Q3 as the credit market meltdown likely thwarted already-declining demand. It remains to be seen how much earlier gains will compensate for that decline. Lower overall activity does not necessarily correspond with a decline in productivity, since workforce reductions and streamlining ahead of lower future demand can yield a higher level of productivity based on margins.

The Q3 employee-hours component is expected to fall 2% following a 0.8% decrease in Q2. This would be the 5th consecutive drop — and is in line with recent declines in the aggregate hours-worked component in employment data.

Q3 compensation costs are expected up a healthy 3.5% following a 3.7% increase in Q2. Downside risks to compensation come from reduced bonus payments and benefits. Recent increases in average hourly earnings from employment reports over the quarter support a continued advance in compensation costs, though Q3 ECI managed only a 3% increase.

• Q3 Non-Farm Productivity is expected to rise 0.8% following a 4.3% increase in Q2
• Unit Labor Costs are expected up 3.2% after a 0.5% decline prior
• Output growth is expected to fall 2.5% after a 3.4% increase in Q2

Productivity was pressured later in Q3 as the credit market meltdown likely thwarted already-declining demand. It remains to be seen how much earlier gains will compensate for that decline. Lower overall activity does not necessarily correspond with a decline in productivity, since workforce reductions and streamlining ahead of lower future demand can yield a higher level of productivity based on margins.

The Q3 employee-hours component is expected to fall 2% following a 0.8% decrease in Q2. This would be the 5th consecutive drop — and is in line with recent declines in the aggregate hours-worked component in employment data.

Q3 compensation costs are expected up a healthy 3.5% following a 3.7% increase in Q2. Downside risks to compensation come from reduced bonus payments and benefits. Recent increases in average hourly earnings from employment reports over the quarter support a continued advance in compensation costs, though Q3 ECI managed only a 3% increase.

Nonfarm productivity rose 4.3% in the second quarter of 2008 as nonfarm output rose 3.4% and businesses reduced the number of hours of production by 0.8%. This increase was well above the 3.5% that analysts had expected and was the largest gain in productivity since Q3 2007. Y-0-Y nonfarm productivity is up 3.4%, its largest gain since 2004.

Hourly compensation in the nonfarm sector rose 3.7% during the quarter, about the same as the first quarter increase but workers were productive enough to reduce businesses’ labor costs overall by 0.5%, the first decline since mid-2007. On a y-on-y basis unit labor costs are up only 0.6% helping to offset cost increases from fuel and other input costs.

Manufacturing productivity did not do as well as overall productivity, falling by 2.2% during the quarter as output fell faster than the reduction of hours in manufacturing. That is the largest decline in manufacturing productivity in almost 20 years. Increasing hourly compensation and falling productivity produced a 6.2% increase in unit labor costs in manufacturing and contributed to other cost pressures in the manufacturing sector. Y-o-Y manufacturing productivity has increased 2.4% and manufacturing output has fallen 0.2%.

Productivity in all nonfinancial corporations, manufacturing and service industries, increased 5.6% at an annual rate in Q2 following a decline in productivity during Q1. That was the largest gain in productivity since late 2005. The large increase in productivity reduced unit labor costs 1.8% despite a 3.7% gain in hourly compensation during the quarter.

• Q2 Final Non-Farm Productivity is expected to be revised up to 3.5% following a 2.2% reading in the preliminary report
• Q2 Final Unit Labor Costs are expected to be revised down to 0% from a 1.3% reading previous

The higher-than-expected revision to prelimary Q2 GDP is a big factor in the expected upward revision to Q2 Non-Farm Productivity. The 3.3% GDP growth rate is well above the 1.7% increase in output growth reported in the Preliminary Q2 Non-Farm Productivity data.

The hours worked component, down 0.5% in the preliminary report, could be revised lower and thus poses downside risks to estimates for Q2 productivity.

• Q2 Final Non-Farm Productivity is expected to be revised up to 3.5% following a 2.2% reading in the preliminary report
• Q2 Final Unit Labor Costs are expected to be revised down to 0% from a 1.3% reading previous

The higher-than-expected revision to prelimary Q2 GDP is a big factor in the expected upward revision to Q2 Non-Farm Productivity. The 3.3% GDP growth rate is well above the 1.7% increase in output growth reported in the Preliminary Q2 Non-Farm Productivity data.

The hours worked component, down 0.5% in the preliminary report, could be revised lower and thus poses downside risks to estimates for Q2 productivity.

Compensation costs, up 3.6% in the preliminary report, may also be downwardly revised, though this is not expected to have a significant impact on headline productivity. Unit Labor Costs, typically a volatile measure, are expected to be revised to unchanged from 1.3% in the preliminary report. That would support an upward revision to headline productivity over the period.

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.