Tag: labor productivity

Labor Productivity Estimates for the Fourth Quarter Were Revised Lower

The Bureau of Labor Statistics lowered its estimates of productivity growth down from 2.0 percent as originally stated to 1.3 percent. Output growth was also reduced for the quarter, down from 6.6 percent to 5.0 percent. Still, that figure suggests relatively strong growth overall, consistent with the bounce we saw in the second half of 2013. Unit labor costs edged slightly lower, off 0.1 percent in the fourth quarter.

Nondurable goods manufacturing was weaker than originally reported, with output up 2.4 percent instead of 4.1 percent. Labor productivity for nondurable goods decreased by 0.1 percent, with unit labor costs up 0.3 percent. On a year-over-year basis, productivity rose 1.0 percent, output increased 1.2 percent, and unit labor costs fell 0.2 percent.

In the durable goods sector, the news was quite positive, even with the latest revisions. Labor productivity increased a modest 3.0 percent on a huge jump in output of 7.5 percent. Unit labor costs declined 1.3 percent, helping to keep the sector more competitive globally. Speaking to the strengths of durables over the past year, output rose 4.6 percent over the past 12 months.

In the larger economy, labor productivity in the nonfarm business sector was also revised lower, down from the original estimate of 3.2 percent to 1.8 percent. Output increased 3.4 percent, and unit labor costs were marginally down by 0.1 percent.

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

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Manufacturing Labor Productivity Dropped 0.1 Percent in the Third Quarter

The Bureau of Labor Statistics said that labor productivity for the manufacturing sector was down 0.1 percent in the third quarter, its slowest pace in one year. Beyond the headline figure, the manufacturing data were split between durable and nondurable goods sectors.

Labor productivity for durable goods firms was up 1.1 percent, boosted by output growth of 3.1 percent. Durable goods productivity was lower than what was observed in the second quarter (4.3 percent), but output increased (up from 1.4 percent). The good news was that unit labor costs for durables was down in each of the past four quarters, with unit labor costs decreasing 0.8 percent in the third quarter. Overall, we have seen an 11.0 percent decline in unit labor costs for durable goods industries since the end of 2009. This helps businesses become more competitive globally.

In contrast, labor productivity and output for nondurable goods firms were both down 1.0 percent in the third quarter. This suggests continued weaknesses for nondurable goods manufacturers, which has seen output declines in each of the past two quarters. Unit labor costs were also higher in both the second and third quarters, up 2.5 percent and 4.0 percent, respectively.

In the larger economy, nonfarm productivity grew 3.0 percent, higher than the earlier estimate of 1.9 percent. Output growth clearly picked up in the third quarter, increasing from 3.3 percent in the second quarter to 4.7 percent. Unit labor costs were down 1.4 percent in the third quarter.

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

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Monday Economic Report – November 18, 2013

Here is the summary for this week’s Monday Economic Report:

In July, year-over-year growth in manufacturing production was 1.2 percent, the slowest pace of growth in output for the sector since January 2010. It was the culmination of weaknesses experienced among manufacturers since mid-2012 as global demand and domestic uncertainties weighed heavily on overall production, pushing it to disappointingly low levels. Since then, however, we have begun to see a pickup in new orders and overall sentiment. The year-over-year pace of manufacturing production was 3.3 percent in the Federal Reserve Board’s most recent industrial production report. Manufacturing output has risen 1.1 percent in just the past three months, with capacity utilization up from 75.7 percent to 76.2 percent over that time frame.

While there has been progress, some weaknesses persist for the sector. Nondurable goods production continues to lag behind durable goods, with year-over-year growth of 1.5 percent for nondurable goods firms relative to a much stronger 5.4 percent increase for durable goods. Moreover, manufactured goods exports remain slow, up 2.2 percent year-to-date through September relative to the same nine-month period in 2012. Nonetheless, this suggests some improvement from the 1.7 percent year-to-date rate that was observed through June, with declines in export levels to Europe lessening as the year progresses. Meanwhile, the overall U.S. trade deficit widened from $38.7 billion in August to $41.8 billion in September largely on higher goods imports.

Labor productivity in the manufacturing sector rose at a slower pace in the third quarter, up 0.4 percent versus the 2.7 percent gain in the second quarter. Output was higher in the third quarter, led by strong gains for durable goods businesses. Unit labor costs were down 0.4 percent for durable goods manufacturers, helping to make them more competitive globally. Unit labor costs have decreased a whopping 11.1 percent for the durable goods sector since the end of the recession. In contrast, the numbers for nondurable goods manufacturers were more challenging, with third-quarter output down 0.3 percent and unit labor costs up 3.4 percent.

The two sentiment surveys released last week were both lower. The National Federation of Independent Business’s (NFIB) Small Business Optimism Index dropped from 93.9 in September to 91.6 in October. Weaker sales growth and continuing political frustrations were key factors in the latest drop in attitudes.

Meanwhile, the Empire State Manufacturing Survey from the New York Federal Reserve Bank reported contracting activity levels in November for the first time since May, with reduced new orders and shipments and employment stalled. Despite reduced optimism about the current economic environment, manufacturers in the New York Federal Reserve district remain mostly upbeat about the next six months. Nearly half of the respondents anticipate increased new orders and shipments in the coming months, with one-third expecting to add new workers. The latter is a potentially hopeful sign, especially with so many manufacturers hesitant to hire of late. Indeed, 56.6 percent said they were not planning to change their employment levels.

This week, we will learn even more about current manufacturing activity, with new surveys from the Kansas City and Philadelphia Federal Reserve Banks. In addition, Markit will release Flash PMI survey data for the United States, China and the Eurozone. Financial markets will focus on the minutes of the Federal Open Market Committee’s meeting October 29–30, trying to glean additional insights about future monetary policy directions before the upcoming December 19–20 meeting. As such, this will build on last week’s confirmation hearing of Janet Yellen to be the next Federal Reserve Board chair, in which she mostly reiterated the need to continue the Federal Reserve’s accommodative policies. Other highlights will be new data on consumer and producer prices, existing home sales, homebuilder optimism, job postings, retail sales and state employment changes.

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

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Manufacturing Labor Productivity Revised Lower in Second Quarter to 1.9 Percent

The Bureau of Labor Statistics revised its labor productivity data for the manufacturing sector in the second quarter, down from its original estimate of 2.7 percent to 1.9 percent. In the original release, manufacturing output rose 0.1 percent. Instead, production was off by 0.6 percent, pushing the overall productivity numbers down. With real hourly compensation up 4.2 percent in the sector, unit labor costs for manufacturers increased 2.3 percent in the second quarter, up from the 1.4 percent gain in the earlier data. Ideally, we would like to see negative unit labor costs, as this helps businesses become more competitive globally.

The downward revisions to productivity extended to both durable and nondurable goods sectors, with the former faring better than the latter. Labor productivity in the durable goods sector was lowered from 4.5 percent to 3.5 percent, with output up 0.5 percent and unit labor costs increasing 1.3 percent. This represented a sizable deceleration in output from the first quarter, but only a marginal decline in labor productivity.

For nondurable goods businesses, output fell 1.9 percent and productivity was up just 0.2 percent. Each was lower than the original estimate of down 1.5 percent and up 0.7 percent, respectively.  Unit labor costs for nondurable goods manufacturers rose 3.2 percent. These were significant pullbacks from the growth experienced in the first quarter.

In the larger economy, the revisions were on the favorable side. Nonfarm labor productivity grew 2.3 percent, much higher than the original estimate of 0.9 percent. That was the fastest pace since the third quarter of 2012. Output increased 3.7 percent, up from the 2.6 percent figure reported before. Real compensation in the nonfarm sector was up 2.3 percent, and unit labor costs were unchanged. Unit labor costs had been said to have risen 1.4 percent earlier, suggesting improvement in this variable.

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

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Manufacturing Labor Productivity Eased in the Second Quarter

The Bureau of Labor Statistics reported that labor productivity eased somewhat in the manufacturing sector, up 2.7 percent in the second quarter versus 3.9 percent in the first quarter. Both of these figures, however, exceed the averages of the past years, with labor productivity in the sector up 1.0 percent and 1.8 percent, respectively, in 2011 and 2012. One of the larger challenges with the second quarter data was the slowdown in manufacturing output, which rose just 0.1 percent from the quarter before. As a result, unit labor costs for the sector increased 1.4 percent as compensation costs exceeded the gains in labor productivity. Ideally, we would like to see negative unit labor costs, as this helps us become more competitive globally.

Labor productivity gains were larger in the durable goods sector than for nondurable goods, up 4.5 percent versus 0.7 percent. Along those lines, the data were generally better for durable goods firms on net. Output in the durable goods sector was up 1.5 percent, and unit labor costs rose 0.1 percent on real compensation gains of 4.6 percent. In contrast, nondurable goods output declined 1.5 percent in the second quarter and real compensation was up by 3.5 percent. This pushed unit labor costs for nondurable goods firms up 2.8 percent.

Note that unit labor cost comparisons with the fourth quarter of 2012 and the first quarter of 2013 are somewhat difficult, as noted in June’s revision of first quarter productivity data. The compensation data in those two quarters were impacted by shifts in income due to the fiscal cliff, with accelerated payouts of dividends and bonuses at year’s end inflating compensation in the fourth quarter. The large swing higher in the fourth quarter was then met with a large swing down in the first, making the unit labor cost information more difficult to interpret, both for manufacturers and other businesses.

Turning to the larger economy, nonfarm labor productivity rose 0.9 percent in the second quarter. This follows declines of 1.7 percent each in both of the past two quarters. As such, this was a positive development. Nonfarm output rose 2.6 percent, with unit labor costs up by 1.4 percent. Overall, this data is good, but still not great. The modest gains in labor productivity in the second quarter were better than the 0.5 percent gains of 2011, but they remain below the 2012 average of 1.5 percent.

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

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Nonfarm Labor Productivity Revised Sharply Higher, with Manufacturing Lower

The Bureau of Labor Statistics reported that nonfarm productivity was up 2.9 percent in the third quarter. This is up sharply from the 1.9 percent estimate originally provided and was largely a factor of higher-than-originally-stated output. Indeed, real GDP was also revised higher last week and is now estimated to have gone up by 2.7 percent. The larger labor productivity numbers helped to push unit labor costs for the nonfarm sector down 1.9 percent in the third quarter for the second quarter in a row, helping to improve businesses’ costs and competitiveness.

For manufacturers, the opposite is true. The previous estimate said that manufacturing labor productivity fell by 0.4 percent in the third quarter; this revision pushes that to a decrease of 0.7 percent. Output also dropped 0.7 percent, and the number of hours was unchanged. The net result was that unit labor costs for the sector declined by 3.2 percent. Therefore, manufacturers have seen substantial unit labor cost increases so far in 2012, reversing the more positive news of 2010 and 2011 when productivity was helping to make the sector more competitive globally. Much of this shift can be explained by decelerating, or more recently falling, output.

It might also be instructive to separate out this discussion between durable and nondurable goods manufacturing. In the third quarter, nondurables fared better than durables. Output for nondurables rose 0.7 percent, which contrasts with a 1.9 percent drop for durables. This largely accounts for the difference in labor productivity between the two, with durable goods output per hour for all persons down 1.6 percent and nondurable productivity up 0.7 percent. With that said, unit labor costs for each were both higher, up 3.7 percent and 3.0 percent, respectively.

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

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