With overall manufacturing output rising, overall productivity among manufacturers rose 6.3 percent in the first quarter of 2011, up from 5.1 percent in the fourth quarter of 2010, according to data released today by the U.S. Bureau of Labor Statistics.  Productivity gains were higher for durable goods (9.8 percent) than nondurables (4.5 percent). Over the course of the last year, manufacturing output per hour for all persons has risen 4.7 percent, and as a result, unit labor costs have fallen 1.4 percent.  Hours worked and compensation grew 3.3 and 2.6 percent, respectively, so the decline in unit labor costs was simply a factor of stronger output growth (up 9.7 percent).

For the overall economy, productivity rose 1.6 percent, slowing from the 2.9 percent gain in the previous quarter, reflecting a sluggish economic growth and rising compensation. Hourly compensation for nonfarm workers was up 2.6 percent, with overall labor costs rising 1.0 percent.

Overall, this report shows that manufacturers are bucking the larger trends in the macroeconomy, with higher output and productivity in the first quarter.  These figures lend credence to that strength, and while unit labor costs fell in this quarter, the overall productivity gains should reinforce the need for additional hiring in the manufacturing sector over the coming months, particularly in light of strong output gains.  Indeed, other surveys have suggested that manufacturers have stepped up their hiring of late.

Chad Moutray is chief economist for the National Association of Manufacturers.

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