2016 Was Just Revised Down To The Worst Year For US Productivity Since 1982

US non-farm productivity rose 0.9% QoQ in Q2, slightly better than the 0.7% growth expected and a notable bounce off the 'zero' in Q1.This rebound was largely due to disappointment in the growth of unit labor costs (which rose just 0.6% in Q2), but saw an outrageous upward revision in Q1 (from +2.2% to +5.4% QoQ).

And while there was no market reaction to the data, the most surprising facet in today's productivity and labor cost report was not the latest, Q2, data which came in slightly stronger than expected on productivity at 0.9% vs the 0.7% expected, and slightly weaker on labor costs at 0.6%, half the 1.2% expected, but the dramatic revisions to the prior quarter data, which pushed Q1 labor costs from 2.2% to a whopping 5.4%, even as productivity remained relatively subdued at -0.1%, down from the original 0.0%.

Normally, the sharp upward revision to labor costs would have been enough to prompt a bounce in yields and the dollar, suggesting hotter than expected all-in comp (including bonuses and benefits in addition to wages), but today the market has bigger things to worry about.

Meanwhile, going back to the elephant in the room, America's moribund productivity growth, as Bloomberg writes, paltry productivity has been a disappointing characteristic of the current economic expansion that’s managed about 2 percent growth on average over the past eight years. Without more gains in efficiency, the economy’s so-called speed limit -- the pace at which it can expand without stoking inflation -- is reduced. Weaker output per hour has its roots in less corporate investment in equipment and a slower pace of innovation. Subdued productivity also helps explain why companies have been slow to boost worker pay that would boost the standard of living.

Other Details

  • Productivity rose 1.2 percent from the second quarter of 2016; unit labor costs, which are adjusted for efficiency gains, were down 0.2 percent from a year earlier

  • Adjusted for inflation, hourly earnings rose at a 1.9 percent rate last quarter, after increasing at a 2.3 percent pace in the first quarter
  • Output rose at a 3.4 percent rate, the fastest since the first quarter of 2015, following a 1.8 percent gain
  • Hours worked rose at a 2.5 percent pace, the most in more than a year, after a 1.6 percent gain; compensation for each hour worked rose at a 1.6 percent annual pace following 5.5 percent
  • Latest rise in productivity compares with the 1.2 percent average over the period spanning 2007 to 2016
  • Among manufacturers, productivity rose at a 2.5 percent rate in the second quarter on gains at durable-goods factories, after a 0.3 percent gain
  • Annual average productivity change for 2016 revised to 0.1 percent decline from 0.2 percent increase, marking first annual decrease since 1982; productivity gains revised upward for 2014 and 2015 to 1 percent and 1.3 percent, respectively.

Now that's a legacy.


bshirley1968 Bill of Rights Wed, 08/09/2017 - 09:33 Permalink

You should really change your call sign to 'All About Trump".  You talk as if he is a king rather than a president.  As if he has any control over any of this shit.  He can't get jack shit passed in congress.  The idiot spends his days bickering with the press and trying to get his appointees to do their job.  Got to love that AG pick.......how's that working for him?  He is great with a cell phone and golf time.  When it comes to leadership, policy making, and picking his staff.....not so much.  Right now, the only thing he is king of is clusterfuck. 

In reply to by Bill of Rights

libertyanyday bshirley1968 Thu, 08/10/2017 - 16:06 Permalink

how about a fix? trump is a breath of fresh air to DC. He is hammering mcconnell and ryan......by name.  He calls a spade a spade.  As president he has very little real power other than as a megaphone for what the voters wanted him to do, and he is doing it.  Truimp is our last attempt to right this giant train wreck.  Too bad 52 percent of the electorate is comletely worthless.

In reply to by bshirley1968

two hoots Wed, 08/09/2017 - 08:55 Permalink

How is rorbotic labor separated from human labor and is robotic labor making up for unproductive employees?  What is the  human only production rate?

DEMIZEN two hoots Wed, 08/09/2017 - 09:30 Permalink

obviously, you see the issue - but here is the problem:  you take a truck and deliver 1T of goods using a forklift from point A to point B. what is the share of human labor?  tax productivity and a whole lot of incentives are gone. how would you separate productivities without creating more moral hazard incentives?

In reply to by two hoots

Silver Savior Wed, 08/09/2017 - 09:19 Permalink

I don't want to be productive at work anymore. All it does is give them incentive to keep the skeleton crew well........Skeleton. I think productivity is mostly bad. It only benefits those on top. I don't get more money for being productive either. There is just no incentive and if it means I might lose my job somehow then I will gladly cash out and leave. It will be a big burden lifted because I never plan to return to the workforce. What's left of it.

VW Nerd Wed, 08/09/2017 - 09:22 Permalink

Maybe the American public are wising up and are not going to trade so much of their time and talent for the fraudulent Bennie/J bucks they are forced to accept in exchange.  If the Bennie/J buck wasn't enforced around the globe at the end of a barrel of a gun and had to compete on it's actual demand value, it would eat shit. Actually, it's already showing.  Thank goodness for ZH!!

DemandSider Wed, 08/09/2017 - 09:29 Permalink

Naive, trade surplus countries without an over valued, reserve currency on steroids think they must actually produce something to be productive. Au contraire. Soon, the U.S. will have no domestically owned production at all, and we'll be the most productive country in the world. Then, we can just sit back and let the money roll in.

Kenny Drebson Wed, 08/09/2017 - 09:36 Permalink

i wonder where the robots are gonna be made.............. CHINA?!?  then china will move their citizens to the US to buy US real estate and gradually start electing poticians favourable to chinese policy/ambition.  now THAT is how you meddle and ultimately dominate a foreign democracy.

Cassandra.Hermes Wed, 08/09/2017 - 09:43 Permalink

Yeah we all watch the presidential campaign!

Reading the article I won't put the biased title. Ok productivity didn't grow, but technically productivity is not measurable anymore, most of the products are not physically or fiscally countable anymore

NuYawkFrankie Wed, 08/09/2017 - 10:06 Permalink

re ...Worst Year For US Productivity Since 1982Are we sure that wasn't 1782 ?I seem to recall - I was about 3 days old at the time - great-great-great-grandpappy tellin me that '82 was a horrendous year for beaver-pelts...  nuttin' t' trade, so had to go the whole winter without so much as a whale-oil lamp to keep warm... no liquor either, with GW's goons smashing up the all the whiskey stills....  not to mention those darn injuns raiding the hutch for a free feed of Rabbit McNuggets (no food-stamps in those days- no siree!)... still having flash-backs at the horror of it all...You fckers don't know how lucky you are!

Angry White Guy Wed, 08/09/2017 - 11:30 Permalink

The American worker has been squeezed like a dry turnip.  Businesses can only extract so much.  We're TIRED, and have no motivation to 'give more'...give more for what?  So the CEO can buy another fucking vacation home?FUCK off!

JBPeebles Wed, 08/09/2017 - 13:50 Permalink

"Weaker output per hour has its roots in less corporate investment in equipment and a slower pace of innovation"Doesn't mention stock buybacks. Money is borrowed in order to buy company stock. This shrinks supply. It ups per share price performance. Now of course that means executive pay increases as these packages are tied to short term performance.The trade off is more  long-term debt. That restricts the ability of companies to borrow in the future. That's important because the higher the cost of future borrowing, the less likely that the company will invest into projects, train workers, and improve future performance. The benefit is narrow--to the very few who see their wage grow even higher relative to the line worker--and the cost is broad--to all long-term investors who will face a declining future ROI due to the malinvestment of capital into stock buybacks.To understand corporate finance, you have to look at the tradeoff between the cost of borrowing and the projected ROI under a variety of economic scenarios. Should growth remain slow, higher interest rates don't justify taking the risk unless a project can beat the cost of borrowing.. Now low rate do encourage corporate borrowing but that doesn't translate into economic growth--G-- if I--corporate investment--doesn't rise. The other main components of GDP, C--consumer growth--and G--government spending/Keynesianism, have to make up for the lack of I. Otherwise the direction of growth is slow or negative.The lack of I has a compounding effect. It will slow the general economy absent a rapid rise in G. Trump's budget has an expansion of G in some areas but it's not a broad-based government spending like a New Deal or infrastructure rebuild.Productivity is due to gross output divided by cost of labor. If productivity rises, then people can make more and the cost of living needn't go up. If people make more money but produce less per hour of labor, then prices will rise.The shortage of labor appears to be making it harder to get new workers to produce as much as before. Clearly a lack of business hiring and investment in new projects also slows the economy. And unsaid is the huge impact of record low business formation. Having started a retail business, I know well how hard it is to get sales going and the costs of marketing, hiring, tax compliance etc. are simply too much, especially in this lowering of the tide from the demographic trend of aging. How much easier it was to launch a business when the tide lifted all boats--at least there was demand during the Boomer years that is no more.It's a self-fulfilling doom loop therefore when productivity is sinking. Inflation is imminent. The slow growth prophecy is self-assured when business leaders recognize the trend, restrict investment, and fatten their executive pay in exchange for balance sheet problem.