US Macro Updates

The One Stop Portal for US Macroeconomic Data. Simplified and Summarized! 

We simplify and summarize key data so that you don’t have to spend hours reading confusing and long media releases. Read key economic releases and major events here in under 2 minutes. And we will explain the key takeaway for you. Stay informed and form a robust view on macroeconomic matters to aid your successful investment decisions

Unit Labour Costs and Productivity

2nd Aug 2026 NEW

Key takeaway: Unit labour costs and labour productivity together form one of the most reliable gauges of underlying inflationary pressure in the economy, because when wages rise faster than output per worker, businesses face a cost squeeze that typically feeds through into consumer prices. The inverse relationship between the two is central to this analysis: when productivity accelerates, firms can absorb higher compensation without raising prices, whereas when productivity slumps, even modest wage growth becomes inflationary. Over the past several quarters, the trend has been uneven, with productivity posting intermittently strong readings before losing momentum, and unit labour costs oscillating in a manner that has kept the Federal Reserve cautious about declaring victory on services inflation. Unit labour costs increased 1.3% in Q2 2026 – an encouraging development, suggesting that wage pressures relative to output are easing and that corporate margins may face less cost-side erosion in the near term. Lbour productivity also improved modestly recording a 1.4% rise in Q2 2026 over the previous quarter. This reading while robust has been lower than some of the higher readings seen since 2021. For the Fed, a low productivity reading alongside falling unit labour costs sends a mixed message, offering near-term comfort on inflation while raising questions about the durability of non-inflationary growth. Corporate profitability will hinge on whether productivity remains strong and unit costs remain low.

Unit Labour Costs increased 1.3% in 2Q 2026
Labour Productivity increased 1.4% in 2Q 2026.

11th May 2026 NEW

Key takeaway: Unit labour costs and productivity together form a critical lens for assessing whether wage growth is translating into genuine inflationary pressure, since rising wages only become problematic when they outpace the output workers generate per hour. When productivity gains are strong, businesses can absorb higher compensation without passing costs onto consumers, keeping inflation contained; conversely, when productivity falters alongside sticky wages, unit labour costs rise and margins compress or prices are pushed higher. Over the past several quarters, unit labour costs have shown volatility as the post-pandemic labour market normalisation played out, with periods of elevated cost pressure gradually moderating as productivity recovered from its earlier weakness. The latest January 2026 data present a nuanced and somewhat concerning picture, with both unit labour costs and labour productivity declining sharply by 50% on a quarter by quarter basis, arriving at 2.3% and 0.8% on an annualized basis respectively. While the drop in unit labour costs to 2.3% may appear encouraging from an inflation standpoint, the simultaneous collapse in productivity to just 0.8% signals that output efficiency is deteriorating meaningfully. For corporate profitability, weakening productivity raises the spectre of margin erosion if wage obligations remain sticky even as worker output falls. From the Federal Reserve’s perspective, the combination of moderating but still positive unit labour costs alongside a sharp productivity decline will warrant close monitoring, as any rebound in labour costs against a low productivity base could quickly reignite services inflation pressures.

Unit Labour Costs increased 2.3% in Q1 2026
Labour Productivity increased 0.8% in Q1 2026

 

5th Mar 2026

Key takeaway: The latest productivity data released by the U.S. Bureau of Labor Statistics showed that labor productivity in the nonfarm business sector increased at an annualised rate of 2.8% in the fourth quarter of 2025, as output rose 2.6% while hours worked declined by 0.2%. On a year-over-year basis, productivity was also 2.8% higher than a year earlier, indicating a continued improvement in efficiency across the business sector. For 2025 as a whole, productivity increased 2.2%, broadly in line with the long-term average pace of productivity growth in the US economy. Unit labor costs increased at an annualised rate of 2.8% in the fourth quarter, reflecting stronger hourly compensation, while for 2025 as a whole unit labor costs increased by 1.9%. Unit labour costs had decreased in Q2 and Q3 due to softer increases in hourly compensation and strong increases in productivity. Nonetheless, taken together, the latest report indicates that productivity growth remained relatively solid during 2025, which could help moderate underlying labor cost pressures if sustained. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 2.2%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is close to the long term rate of 2.2%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

8th Jan 2026

Key takeaway: The BLS released its Q3 2025 labour productivity and unit labour cost initial estimates on 7th January 2026. Non-farm business sector labor productivity in 3Q increased a substantial 4.9% as output increased 5.4% and hours worked increased 0.5%. Productivity numbers tend to be volatile and can only be reliably observed in the long run. Labour productivity in the US surged post Covid but gradually began to taper down over the past 2 years. Q1 2025 was the first negative productivity print in 3 years when labour productivity declined 1.8%. However, since then productivity figures for both Q2 and Q3 have been quite robust. Both quarter prints have also been higher than consensus expectations. High levels of immigration and surplus labour combined with very high productivity had helped keep a lid on inflation over the past couple of years, which enabled the central bank to reduce rates. Moreover, the equity market is also strongly tethered to the thesis of an AI related productivity surge which will justify the monumental capex being spent currently. The latest print shows unit labour costs declined 1.9% in Q2 2025. Finally, it is also key to note that productivity still remains high compared to pre-covid averages. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 2.0%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is close to the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

7th Aug 2025

Key takeaway: The BLS released its Q2 2025 labour productivity and unit labour cost initial estimates on 7th August 2025. Non-farm business sector labor productivity in 2Q increased 2.4% as output increased 3.7 percent and hours worked increased 1.3 percent. Productivity numbers tend to be volatile and can only be reliably observed in the long run. Labour productivity in the US surged post Covid but gradually began to taper down over the past 2 years. Q1 2025 was the first negative productivity print in 3 years when labour productivity declined 1.8%, The latest data showed a bounce back in productivity and the print was also higher than consensus expectations of an increase of 1.9%. High levels of immigration and surplus labour combined with very high productivity had helped keep a lid on inflation over the past couple of years. Hence, a dip in productivity, especially at a time of rising inflation expectations, is a cause for concern. The latest print shows unit labour costs rose 1.6% in Q2 2025. The print was a moderation from the 6.9% recorded in Q1 2025. A moderate unit labour costs print, accompanied by the recently released soft print on Employment cost index, reassures market participants on inflation fears, notwithstanding the tariff issues. Finally, it is also key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.8%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

8th May 2025

Key takeaway: The BLS released its Q1 2025 labour productivity and unit labour cost initial estimates on 8th May 2025. Non-farm business sector labor productivity in 4Q came in at negative 0.8%. Labour productivity declined in the US for the first time in almost 3 years. Productivity numbers tend to be volatile and can only be reliably observed in the long run. Nonetheless, the first negative productivity print in 3 years is notable, if not a cause for concern. It was also worse than consensus expectations of a drop of 0.4%. High levels of immigration and surplus labour combined with very high productivity had helped keep a lid on inflation over the past couple of years. Hence, a dip in productivity, especially at a time of rising inflation expectations, is a cause for concern. The latest print also shows unit labour costs rise 5.7% in Q1 2025 – once again the highest since Q1 2024. This number was higher than consensus expectations of 5.3%. Output decreased 0.3% and hours worked increased 0.6%. Productivity has been of keen interest in recent years especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. That is precisely what we have witnessed for most of 2024, including these latest numbers for 1Q 2025. Though it is key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.8%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

6th Mar 2025

Key takeaway: The BLS revised its Q4 2024 labour productivity and unit labour cost initial estimates on 6th March 2025. Non-farm business sector labor productivity in 4Q was revised up from 1.3% to 1.5%. The revision upwards was on account of an increase in output as well as a decrease in the hours worked. However, even at 1.5%, this number was lower than the 2.3% recorded in Q3. It also remains lower than the 3.0-5.0% range that we had seen through the last 3 quarters of 2023. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. That is precisely what we have witnessed for most of 2024, including these latest numbers for 4Q 2024. Though it is key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. Unit labour costs in the non-farm business sector were revised downwards from 3.0% to 2.2%. The downward revision was contributed both by a decrease in hourly compensation and the upward revision in productivity. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.9%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

6th Feb 2025

Key takeaway: The BLS released its Q4 2024 labour productivity and unit labour cost initial estimates on 6th February 2025. Non-farm business sector labor productivity in 4Q came in at 1.2%. This number was lower than the 2.3% recorded in Q3. It was also lower than consensus expectations of 1.5%. Finally it was also lower than the 3.0-5.0% range that we had seen through the last 3 quarters of 2023. Output increased 2.3% and hours worked increased 1.0%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. That is precisely what we have witnessed for most of 2024, including these latest numbers for 4Q 2024. Though it is key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. Unit labour costs in the non-farm business sector increased 3.0%. Understandably, as productivity numbers have declined through 2024, unit labor costs – which are defined as the ratio of hourly compensation to labour productivity – have trended up. In Q4 2024, the hourly compensation increase was 4.2% compared to the 1.2% increase in productivity. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.8%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

10th Dec 2024

Key takeaway: The BLS revised its Q3 2024 labour productivity and unit labour cost initial estimates on 10th December 2024. Non-farm business sector labor productivity in 3Q was unchanged at 2.2%. The number hence remains lower than the 2.1% recorded in Q2 and consensus expectations of 2.6%. Finally it also remains lower than the 3.0-5.0% range that we had seen through the last 3 quarters of 2023. Output increased 3.5% and hours worked increased 1.2%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. That is precisely what we have witnessed for most of 2024. Though it is key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. The preliminary estimates had shown that Unit labour costs in the non-farm business sector increased 1.9%. This number was revised down to 0.8%. Unit labor costs are defined as the ratio of hourly compensation to labour productivity. As productivity has trended down, unit labour costs have trended up. In Q3 2024 however, the hourly compensation increase was revised down from 4.2% to 3.1%. That caused unit labour costs to decline from 1.9% to 0.8%. The downward revision in hourly compensation contrasts with the solid wage increase data seen from the NFP Survey and the ECI releases. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.8%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

7th Nov 2024

Key takeaway: The BLS released its Q3 2024 labour productivity and unit labour cost initial estimates on 7th November 2024. Non-farm business sector labor productivity in 3Q came in at 2.2%. This number was lower than the 2.1% recorded in Q2. It was also lower than consensus expectations of 2.6%. Finally it was also lower than the 3.0-5.0% range that we had seen through the last 3 quarters of 2023. Output increased 3.5% and hours worked increased 1.2%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. That is precisely what we have witnessed for most of 2024. Though it is key to note that productivity still remains high compared to pre-covid averages even though it has been declining from the 2023 levels. Unit labour costs in the non-farm business sector increased 1.9%. Understandably, as productivity numbers have declined through 2024, unit labor costs – which are defined as the ratio of hourly compensation to labour productivity – have trended up. In Q3 2024, the hourly compensation increase was 4.2% compared to the 2.2% increase in productivity. It is also worth noting that Q2 Unit labor costs were revised up from 0.4% to 2.4%. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.8%. This is higher than the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. Lastly, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

5th Sep 2024

Key takeaway: The BLS revised its Q2 2024 labour productivity and unit labour cost data on 5th September 2024. Non-farm business sector labor productivity was revised up from  2.3% to 2.5% in 2Q. The revision was quite minor. More importantly, Q2 productivity was higher than the 0.2% recorded in Q1. Yet it was also lower than the 3.0-5.0% that we have seen through the last 3 quarters of 2023. Output increase was revised up marginally from 3.3% to 3.5% and hours worked increase remained the same at 1.0%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity number or a consistent decline in productivity is concerning from an inflation perspective. Unlike Q1, given the better labour productivity figure, unit labour costs posted a favourable reading compared to 1Q 2024. Unit labour costs were revised down from 0.9% to 0.4%. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.6%. This is similar to the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. While productivity had been surging in recent quarters and has printed a muted number this quarter, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.     

6th Jun 2024

Key takeaway: The BLS revised its Q1 2024 labour productivity and unit labour cost data on 6th June 2024. Non-farm business sector labor productivity was revised down from  0.3% to 0.2% in 1Q. Firstly, the revision was quite minor. Hence the summary takeaway is unchanged that the Q1 productivity number was substantially lower than the 3.0-5.0% that we have seen through the last 3 quarters of 2023. Output increase was revised from 1.3% to 0.9% and hours worked increase was revised from 1.0% to 0.6%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity print is concerning from an inflation perspective. Given the lower labour productivity, unit labour costs had also also posted an unfavourable reading for 1Q 2024. Unit labour costs were revised down from 4.7% to 4.0%. Once again, even though the revised number was substantially lower, it was still meaningfully high. To put this in context, last 2 quarter readings on Unit labour costs were +0.4% and -1.2%. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.5%. This is similar to the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. While productivity had been surging in recent quarters and has printed a muted number this quarter, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run. For instance, hourly compensation growth for Q4 2023 was revised down from 3.5% to 0.6% causing unit labour costs to be revised substantially from 0% to -2.8%.    

2nd May 2024

Key takeaway: The BLS released its Q1 2024 labour productivity and unit labour cost data on 2nd May 2024. Non-farm business sector labor productivity increased only 0.3% in 1Q. Firstly, this productivity number is substantially lower than the 3.0-5.0% that we have seen through the last 3 quarters of 2023. Second, it is also lower than consensus expectations of 0.8%. Output increased 1.3% and hours worked increased only 1.0%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Hence, a significantly lower productivity print is concerning from an inflation perspective. Similarly, given the lower labour productivity, unit labour costs also posted an unfavourable reading for 1Q 2024. Unit labour costs increased a relatively muted 4.7% in Q1 against consensus expectations of 3.6%. To put this in context, last 2 quarter readings on Unit labour costs were +0.4% and -1.2%. Hourly compensation grew 5.0%. During the current business cycle, starting in the 4th quarter of 2019, labour productivity has grown at an annual rate of 1.5%. This is similar to the 1.5% seen in the previous cycle from 4Q 2007 till 4Q 2019 and is below the long term rate of 2.1%. While productivity had been surging in recent quarters and has printed a muted number this quarter, it is worth re-emphasizing that these measurements tend to be volatile in the short run and it can be best observed only in the very long run.    

7th Mar 2024

Key takeaway: The BLS released revised Q4 2023 labour productivity and unit labour cost data on 7th Mar 2024. Non-farm business sector labor productivity was unchanged in the revised report at 3.2%. Unit labour costs were revised slightly down from 0.5% to 0.4%. Even with the minimal revisions, the underlying story remains the same. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. However, while productivity has been surging in recent months it is very important to note that productivity is difficult to count and the reported numbers tend to be volatile. The effects of productivity are best noticed over the long run. Take 3rd quarter data for instance. While initial reports had suggested that non farm labour productivity had increased at an above 5% annualized rate, the data was revised subsequently to 4.7%. Similarly, Hourly compensation was also revised upwards from 3.8% to 4.8% for 3rd quarter 20223, resulting in unit labour costs changing from a 1.1% decrease in the initial releases to a o.1% increased in the revised release. On an annual basis, labour productivity grew 1.3% in 2023 compared to a decrease of 1.9% in 2022 and a 2.5% increase in 2019. Similarly, on an annual basis, unit labour costs increase 3.0% in 2023 compared to 5.7% in 2022 and 1.7% in 2019.   

1st Feb 2024

Key takeaway: The BLS released its Q4 2023 labour productivity and unit labour cost data on 1st Feb 2024. Non-farm business sector labor productivity increased 3.2% in 4Q. This makes it the 3rd quarter running when productivity numbers have come in strong. Output increased 3.7% and hours worked increased only 0.4%. Productivity has been of keen interest in recent months especially because it has been surging compared to pre-pandemic averages and helping bring down unit costs and consequently inflation. Similarly, unit labour costs also posted a favourable reading for 4Q 2023. Unit labour costs increased a relatively muted 0.5% in Q4 against consensus expectations of 1.3%. Hourly compensation grew 3.7%. This release was yet another addition in the long list of recent economic indicators that have been suggesting a soft landing. There are a few more points to note though about this Productivity data release, especially for the full year of 2023. Labour productivity for the full year of 2023 increased 1.2% which is still lower than the 2.3% seen in 2019 before the pandemic. Similarly, on an annual basis, unit labour costs grew at a higher rate of 2.9% in 2023 compared to 1.6% in 2019. While productivity is surging in recent months and quarters, it measurements tends to be volatile in the short run and it can be best observed only in the very long run.    

6th Dec 2023

Key takeaway: The BLS released revised Q3 2023 labour productivity and unit labour cost data on 6th Dec 2023. Non-farm business sector labor productivity was revised further up from 4.7% to 5.2%. And unit labour costs were revised further down from -0.8% to -1.2%. Both readings were very favourable for risk markets in general. Productivity, as a topic, has gained significant attention in recent months especially as the world watches whether we will have a repeat scenario of a soft landing similar to the mid nineties. The key protagonist of that nineties soft landing movie was Productivity. Productivity gain at 5.2% is a solid number. Especially when you consider that in the current business cycle which started from the 4th quarter of 2019, labor productivity has grown at an annual rate of 1.4% only. Unit labour costs decreased  a revised 1.2% in Q3. This number was also significantly lower than the past 4 quarter average of +1.6%. Large improvements in productivity can help sustain headline wage growth and yet keen inflation down. Improving productivity and decreasing unit labour costs was a very significant development in a week that generally featured positive news (from a risk markets perspective) on all fronts – yields collapsing, jobs reports moderating, ISMs resilient, etc.   

2nd Nov 2023

Key takeaway: Non-farm business sector labor productivity increased a substantial 4.7% in the third quarter of 2023. That was significantly above consensus expectations for a productivity increase of 4.1%. Output increased by 5.9% and hours worked increased by 1.1%, resulting in a substantial productivity gain. Compared to the year ago quarter, productivity increased 2.2%. This was a very significant development in a week that generally featured positive news (from a risk markets perspective) on all fronts – yields collapsing, jobs report moderating, ISMs moderating, etc. Similar to the positive news on productivity, Unit labor costs in the non-farm business sector also decreased 0.8% in the third quarter of 2023 against consensus expectations for an increase of 0.7%. Nominal wages reflected by hourly compensation increased 3.9%. But the large gain in productivity ensured unit labour costs remained low. According to the BLS, during the current business cycle which started from the 4th quarter of 2019, labor productivity has grown at an annual rate of 1.4% only, reflecting a 2.0% annual growth in output and a 0.7% annual rise in hours worked. This 1.4% rate is historically a low productivity rate compared to the long term historical average (since 1947) of 2.1%. The last point to note is that this data tends to be volatile and is often revised significantly.  

7th Sep 2023

Key takeaway: The BLS released revised Q2 2023 labour productivity and unit labour cost data on 7th Sep 2023. Non-farm business sector labor productivity for Q2 was revised downwards from 3.7% in the preliminary estimate to 3.5%. Even with the revision, a 3.5% increase in productivity is a healthy number. Output increased by 1.9% and hours worked actually decreased by 1.5%, resulting in a substantial productivity gain. The decline in hours worked is the first since the second quarter of 2020 (peak covid). While the productivity gain is impressive, the lower hours worked are not a great indicator of positive momentum in the economy. Compared to the year ago quarter, productivity also increased 1.3%. On the other hand, Unit labor costs in the non-farm business sector were revised upwards for Q2 – from an initial estimate of 1.6% to a revised estimate of 2.2%. Nominal wages showed an increase of 5.7% in hourly compensation, which was offset by the improvement in productivity. According to the BLS, during the current business cycle which started from the 4th quarter of 2019, labor productivity has grown at an annual rate of 1.3% only, reflecting a 2.0% annual growth in output and a 0.6% annual rise in hours worked. This 1.3% rate is historically a low productivity rate compared to the long term historical average (since 1947) of 2.1%. The last point to note is that this data tends to be volatile and is often revised significantly.  

3rd Aug 2023

Key takeaway: Non-farm business sector labor productivity increased 3.7% in the second quarter of 2023. That was significantly above consensus expectations for a productivity increase of 2.0%. Output increased by 2.4% and hours worked actually decreased by 1.3%, resulting in a substantial productivity gain. Compared to the year ago quarter, productivity also increased 1.3%. Similar to the positive news on productivity, Unit labor costs in the non-farm business sector increased by a lower than expected 1.6% in the second quarter of 2023. Consensus expectations were for an increase of 2.6%. However, nominal wages showed an increase of 5.5% in hourly compensation, which was offset by the improvement in productivity. According to the BLS, during the current business cycle which started from the 4th quarter of 2019, labor productivity has grown at an annual rate of 1.4% only, reflecting a 2.0% annual growth in output and a 0.7% annual rise in hours worked. This 1.4% rate is historically a low productivity rate compared to the long term historical average (since 1947) of 2.1%. The last point to note is that this data tends to be volatile and is often revised significantly.  

1st Jun 2023

Key takeaway: The BLS released revised Q1 2023 labour productivity and unit labour cost data on 1 Jun 2023. The preliminary estimates had shown Non-farm business sector labor productivity decreased 2.7% in the first quarter of 2023. That number was revised down to 2.1%. Output was revised from 0.2% up to 0.5% up. And hours worked were revised from an increase of 3.0% to an increase of 2.6%. Compared to the year ago quarter, the revised numbers showed productivity decreased 0.8% as output increased 1.4% and hours worked increased 2.2%. Unit labor costs in the non-farm business sector was revised from an increase of 6.3% to an increase of 4.2% in the first quarter of 2023. Despite the revised the summary remains that the sharp decrease in productivity and the increase in unit labor costs only underscores the inflation challenge facing the Fed. However, in a significant development, the BLS revised 4th quarter 2022 unit labour costs from and increase of 3.3% to a decrease of 2.2%. These numbers do tend to be volatile. But this is nonetheless an important revision since it shows unit labor costs falling instead of rising in 4Q 2022. If real hourly compensation was lower than the market previously thought, it might suggest that the real purchasing power and savings of the consumers might deplete faster than currently presumed.  

4th May 2023

Key takeaway: Non-farm business sector labor productivity decreased 2.7% in the first quarter of 2023. Output increased by 0.2% and hours worked increased by 3.0%. Compared to the year ago quarter, productivity also decreased 0.9% as output increased 1.3% and hours worked increased 2.3%. Unit labor costs in the non-farm business sector increased 6.3% in the first quarter of 2023, reflecting a 2.3% increase in hourly compensation and a 2.7% decrease in productivity. The sharp decrease in productivity and the increase in unit labor costs only underscores the inflation challenge facing the Fed. According to the BLS, during the current business cycle which started from the 4th quarter of 2019, labor productivity has grown at an annual rate of 1.1% only, reflecting a 1.9% annual growth in output and a 0.8% annual rise in hours worked. This 1.1% rate is historically a low productivity rate. No previous business cycle had lower productivity growth except for a brief 6 quarter cycle from 1980 Q1 to 1981 Q3, when productivity grew 1.0%. 

Unit Labor Costs measure the annualized change in the price businesses pay for labor, excluding the farming industry. The Bureau of Labor Statistics calculates unit labor costs as the ratio of hourly compensation to labor productivity. Productivity is a measure of economic performance that compares the amount of goods and services produced (output) with the amount of inputs used to produce those goods and services. In the context of this data, the BLS calculates Labor Productivity or Output per hour, by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors and unpaid family workers. Data on Productivity and Costs is released by the Bureau of Labor Statistics every quarter. Typically a preliminary read is released in the first week of the 2nd month of the subsequent quarter with the final reading coming later in the first week of the 3rd month.

Unit Labor Costs and Productivity – BLS