The Bureau of Labor Statistics revised its labor productivity figures for the first quarter, with very modest changes overall. Labor productivity for the manufacturing sector rose 3.5 percent for the quarter, just slightly lower than the original estimate of 3.8 percent. This increase stemmed from a 5.3 percent gain in output in the first quarter.
One area where there was a very significant revision was in the compensation and unit labor cost measures. This was true for all businesses, and I suspect that some of it could be tied to what we saw in the personal income data at year’s end as individuals worried about possible higher taxes related to the fiscal cliff deal. Hourly compensation for nonfarm businesses was revised from an earlier estimate of 2.7 percent to a new figure of 9.9 percent. I can only guess that this was due to accelerated end-of-year payouts, including dividend payments and bonuses, as companies sought to avoid possibly higher tax rates in 2013.
For manufacturers, hourly compensation was changed from a gain of 0.4 percent to an increase of 16.7 percent. As a result, unit labor costs for in the fourth quarter, which had originally been estimated to fall by 1.8 percent, were instead up by 14.0 percent. With such a dramatic shift, we see the reverse of that in the first quarter of 2013. Hourly compensation declined by 6.9 percent, with unit labor costs down by 10.0 percent.
Despite these large revisions, the larger storyline is still the same. Manufacturers increased their productivity fairly strongly in the first quarter of this year, assisted by higher output and by an ever-present desire to operate more leanly.
In the larger economy, labor productivity in the nonfarm business sector rose 0.5 percent, below its original estimate of 0.7 percent. Still, this was an improvement from the 1.7 percent decline in the prior quarter, and this gain was largely due to an increase in output of 2.1 percent.
Chad Moutray is chief economist, National Association of Manufacturers.
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