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A simple summary of this release is that the rate of productivity growth is up , whilst the rate of growth of labor costs is contracting. However, this final report has significantly reduced the productivity growth and labor cost contraction.
[Note: This post is a markup of the preliminary data post. The market was expecting an non-farm productivity improvement of 1.7% to 2.9% (consensus 2.4%)- versus the 1.8% actual. There is enough differences that one must wonder if the BLS should abort issuing a preliminary productivity and cost information.]
The headlines annualize quarterly results (Econintersect uses year-over-year change in our analysis). Based on preliminary data, the Bureau of Labor Statistics reported that non-farm business productivity increased at an annual rate of 3.2% 1.8% in the fourth quarter of 2013. The market was expecting 2.4% to 2.5% productivity growth. However, if data is analyzed in year-over-year fashion, productivity was up 1.7% 1.3% year-over-year.
Unit labor costs (non-farm business) decreased at an annual rate of 1.6% 0.1% in the 4Q2013 (decreased 1.3% 0.9% year-over-year) with the market expecting -0.5% -0.3% to 0.0%.
Although one could argue that productivity improvement must be cost effective, it is not true that all cost improvement are productivity improvements.
Even though a decrease in productivity to the BLS could be considered an increase in productivity to an industrial engineer, this methodology does track recessions. The current levels are well above recession territory.
Seasonally Adjusted Year-over-Year Change in Output of Business Sector
But the output per person growth has been growing for 2013.
Seasonally Adjusted Year-over-Year Change of Output per Hour
All this is happening while costs per unit now is declining.
Seasonally Adjusted Year-over-Year Rate of Change of Unit Labor Costs
The headlines from the press release:
