Courtesy of Mish.
Wages are up and output per hour is down. Is this the magic mix for what ails the economy?
Productivity declined 0.6%, exactly in-line with the Bloomberg Econoday consensus.
Productivity remains a key weakness of the economy and is especially evident during the low output of the first quarter. The second estimate of first-quarter nonfarm productivity came in at a quarter-to-quarter annualized decline of 0.6 percent. Output during the quarter rose 0.9 percent but the increase was outmatched by a greater increase for hours worked, up 1.5 percent. Not only did hours exceed output, compensation rose at the same time, up 3.9 percent to lift unit labor costs by 4.5 percent.
Trends in the data show less weakness with year-on-year productivity up 0.7 percent and unit labor costs up 3.0 percent. Here output, up a year-on-year 2.3 percent, exceeds hours worked, up 1.6 percent. Compensation is up a year-on-year 3.7 percent with unit labor costs up 3.0 percent.
American workers did not perform well in the first quarter, reflecting to a significant decline lack of business investment in new equipment.
Nonfarm Productivity vs. Costs
Curiously, Bloomberg also states “Nonfarm productivity growth has remained healthy during this expansion, but it has prevented employment from growing very fast and this hurt income growth to some extent. Unit labor costs tend to fall when productivity growth accelerates and then rises as productivity growth abates.”
The above chart does not look like “healthy” gains in productivity to me.
Unexpectedly Strong Wage Growth
The Wall Street Journal chimes in with U.S. Productivity Fell 0.6% in First Quarter.
