Macroeconomics

Labor Productivity: 2015Q1 vis-à-vis 2014Q1.

Labor Productivity increased 0.2 percent when comparing 2014 first quarter and 2015 first quarter. Hours worked by all persons in the labor market increased 0.3 percent in 2015Q1 vis-à-vis 2014Q1. Compensation per hour changed 0.18 percent, whereas the Unit Labor Cost increased 0.16%. It is important to note that, while Output per person, working in nondurable goods manufacturing industry, augmented by 2.2%, the Unite Labor Cost in the same sector decreased by 0.3 percent. Compensation instead changed by 1.9%.

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Industry specifics:

By looking at industry specifics, Labor Productivity in Manufacturing of Durable Goods increased by 1.2%, while Output in the industry did so by 4.1%. The number of hours worked in this sector increased by 2.8%, whereas real compensation did so by only 1.6%.

These data may help economist in understanding why GDP slowed down in the first quarter 2015, while unemployment rate stuck to 5.4%. On one side, Discourage Workers seem to be back in the labor market as more hours worked are being demanded by producers. On the other side, although workers are working longer workweeks, compensation has changed significantly, which gets reflected in low levels of inflation.

Perhaps the only conclusion for now clear is that the economy might be being driven by expectations. Based on the current figures and the optimism revealed in the Beige Book, it is possible to assert that most of the increase in level of employment is being generated solely by positive, and perhaps “risky” expectation of the close future.

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On the other hand, Nonfarm Business Sector Labor Productivity decline for second quarter in a raw during the past year. BLS Revised data, released on June 4th 2015, confirmed labor productivity declined by 3.1 percent at an annual rate, which complements data on GDP negative growth for 2015Q1. Data released along the current week on the contraction of GDP, Construction, Labor Market and Productivity, reveal expectations and future outlooks of Business Leaders ought to be driven the economy and especially the labor market.

Finally, the U.S. Bureau of Labor Statistics noted that “from the first quarter of 2014 to the first quarter of 2015 productivity increased 0.3 percent”. One of the key labor indicators derived from productivity measures is Unit Labor Cost, which has actually increased 1.8 percent in the last year. For the first quarter of 2015, BLS asserted Unit Labor Cost increased by 6.7 percent. Such a statistic reflects the mentioned 3.1 percent decline in productivity, and a 3.3 percent increase in compensation by the hour.

 

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