Productivity Up 0.4%, Well Under Expectations of 0.7%, Labor Costs Up 2.9%


First-quarter US productivity was a disappointing 0.4%. Manufacturing productivity declined 1.2%. Wages rose 2.9%.

The BLS reports Productivity rises 0.4% in first-quarter 2018; unit labor costs rise 2.9% (annual rates).

  • Nonfarm business sector labor productivity increased 0.4 percent during the first quarter of 2018 as output increased 2.7 percent and hours worked increased 2.3 percent.
  • From the first quarter of 2017 to the first quarter of 2018, productivity increased 1.3 percent, reflecting a 3.6-percent increase in output and a 2.3-percent increase in hours worked.
  • Manufacturing sector labor productivity decreased 1.2 percent in the first quarter of 2018, as output increased 1.7 percent and hours worked increased 2.9 percent.
  • Productivity declined 0.8 percent in the durable manufacturing sector, as output rose 3.3 percent and hours worked increased 4.2 percent. In the non-durable goods manufacturing sector, a 0.9-percent decrease in productivity reflected no change in output and a 0.9-percent increase in hours worked.

Unit Labor Costs

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  • Unit labor costs in the nonfarm business sector increased 2.9 percent in the first quarter of 2018, reflecting a 3.3-percent increase in hourly compensation and a 0.4-percent increase in productivity. Unit labor costs increased 1.3 percent over the last four quarters.
  • BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.

It appears the marginal employee is not all that productive.

Mike "Mish" Shedlock

Comments (5)
No. 1-5

The marginal employee lacks the skills to be highly productive. The US is losing the skills and education war, not the trade war.


Well I wonder how many trillions in deficits will those new jobs costed... Which begs the questions to actually be worth it (for the economy) productivity would have to be triple digits.


"It appears the marginal employee is not all that productive." Well, that's one of the arguments against liquidating labor in downturns: long term unemployment reduces the overall skill level, and therefore income, of the society at large. Creating a weaker economy for everyone long-term due to lower sales and less innovation.


Trade deficit was way down.


The marginal employee doesn't lack skills. There is an upper bound on productivity and other measures as more debt gets taken out. We are no longer in business cycles but credit cycles. This one is showing signs of stall speed. With few bullets left to fire central banks will be caught in a Bermuda triangle.

Global Economics