Q1 Productivity Misses; Plunges By Most In 6 Years

Tyler Durden's picture

Nonfarm productivity in the frost-bitten US in Q1 plunged at its fastest pace since Q1 2008. The 3.2% drop is considerably bigger than the 3% expected but was accompanied (oddly) by a rise in employee hours (so despite the catastrophic weather, everyone was going to work and working more) but producing less. Unit labor costs soared 5.7% - the most since Q4 2012.

 

 

From the report:

Nonfarm business sector labor productivity decreased at a 3.2 percent annual rate during the first quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as hours increased 2.2 percent and output decreased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The decrease in productivity was the largest since the first quarter of 2008 (-3.9 percent). From the first quarter of 2013 to the first quarter of 2014, productivity increased 1.0 percent as output and hours worked rose 2.8 percent and 1.7 percent, respectively. (See chart 1 and table A.)

 

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers. The measures released today are based on more recent source data than were available for the preliminary report. 

 

In the first quarter of 2014, nonfarm business productivity fell 3.2 percent, a greater decline than was reported in the preliminary estimate. The revised figure reflects a 1.4 percentage point downward revision to output and a 0.2 percentage point upward revision to hours. Unit labor costs were revised up due to the downward revision to productivity, and grew 5.7 percent in the first quarter of 2014. In the manufacturing sector, productivity growth in the first quarter was revised up to 3.8 percent, due to an upward revision to output and a downward revision to hours worked. Unit labor costs declined 0.4 percent, rather than increasing 0.1 percent as previously reported. 

And notably: 1.8% increase in hours worked in a quarter in which, supposedly, nobody could get to work. Huh???