The United States labor force may not be as weak as analysts had initially estimated for the first quarter, but the soft trend has been persistent enough to remain a massive obstacle for improved economic growth. According to the United States Labor Department, nonfarm productivity has not changed since the last quarter; the metric of hourly output per worker was previously reported to be down at an annual pace of about 0.6 percent.
The biggest notable change was the increase in output. This is a measure of how many goods and/or services companies are able to produce; increasing from 1 percent to about 1.7 percent. At the same time, reports have revised the total number of hours worked per employee up from 1.6 percent to 1.7 percent.
In addition, the United States government also reported labor cost growth at the beginning of this year was not as strong as had been reported last month. This is important as it might shadow inklings of the restricted labor market’s ability to open up for wage growth.
Specifically, unit-labor costs have now been revised from 3 percent down to 2.2 percent. The past year has seen the unit-labor cost metric improve by 1.1 percent, but that is far below the historically high 2.8 percent average the US has seen since the end of WWII. Hourly compensation—including both pay and benefits—however, did revise upward in the first quarter—to 2.2 percent—but adjusting for inflation actual compensation fell by 0.9 percent.
Labor reports also show that real hourly compensation—which takes into account the deviations in consumer prices as well as labor costs—fell by 0.9 percent, which is still slightly more than the 0.8 percent drop as reported previously.
Overall, then, the revised data shows that productivity plunged 4.6 percent in the fourth quarter in the middle of a 3.0 percent fall in hourly compensation. Last year, during the same quarter, productivity showed a 1. percent improvement from the previous quarter with output climbing 2.5 percent and number of hours worked improving by 1.3 percent.
As a measure of comparison, economic productivity has been increasing at a roughly steady 1.2 percent since the beginning of the US economic recovery, which began about 8 years ago. This is far below the 2.1 percent average that the US economy grew under between 1947 and 2016 or the 2.6 percent average growth between 2000 and 2007.