Productivity declines 0.6% in 2nd quarter 2016 (annual rate); unit labor costs rise 4.3%

[mahatmakanejeeves]

Source: U.S. Bureau of Labor Statistics

Economic News Release USDL 16-1770

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Productivity and Costs, Second Quarter 2016, Revised



Transmission of material in this release is embargoed until 8:30 a.m. (EDT) Thursday, September 1, 2016

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PRODUCTIVITY AND COSTS
Second Quarter 2016, Revised

Nonfarm business sector labor productivity decreased at a 0.6-percent annual rate during the second quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 1.1 percent and hours worked increased 1.7 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2015 to the second quarter of 2016, productivity decreased 0.4 percent, the first four-quarter decline in the series since a 0.6-percent decline in the second quarter of 2013. (See table A.)

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in the nonfarm business sector increased 4.3 percent in the second quarter of 2016, reflecting a 3.7-percent increase in hourly compensation and a 0.6-percent decline in productivity. Unit labor costs increased 2.6 percent over the last four quarters. (See tables A and 2.)

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.
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The preliminary Productivity and Costs news release for third-quarter 2016 is scheduled to be released on Thursday, November 3, 2016 at 8:30 a.m. (EDT).

Read more: http://www.bls.gov/news.release/prod2.nr0.htm

[whatthehey]

1. Another touchy report here

Costs up, sharply, and labor productivity down is not a good leading indicator for hiring, except perhaps in robotics and automation companies.

[mpcamb]

2. Another way to read it is underpaid workers, election coming up,

decades without real wage gains, throw 'em a bone. A little money here, a perk there, a benefit or two.

There's a candidate out there ready to feed off the other explanation; that it's a bad thing.
Maybe the reality is that wages need to rise.

[cstanleytech]

3. Plus companies are dumping more and more on those low wage workers and trying to get them to do the

work that would typically take 2 or 3 to do so it wears down people even more and their productivity then plummets.

[whatthehey]

4. They do need to rise yes, but this is not really political machinations

Companies aren't facing rising labor costs because they are helping out the peons before the GE. There isn't even that level of co-ordination within most companies let alone between them, even if it were a shared desire.

The costs are coming from increases in both benefits and wages, the latter because skilled and educated un(der)employed workers are getting thin on the ground (no, that doesn't mean everybody above grunt level has a great job. We're talking about the aggregate of nine figure population across the nation) so they have to outbid other options.

I am not quite as fearful of legislated increases in labor costs as I am organic. Partly because it will be less open to individual choice, and partly because a sudden large scale bump will boost consumption, hence demand for suppliers, hence hiring anyway, much better than creeping raises. That's not to say there won't be a push to automate/streamline/eliminate if somebody providing $10/hr of benefit to the company must be paid $12/hr say. There absolutely will be. But the impact on the overall jobs market will be softened by all the people with 100% marginal propensity to consume spending their additional earnings if we eliminate he desperation wage market at the very bottom end, rather than if we just see the lower-middle wage market incrementally getting more expensive.