WASHINGTON – U.S. nonfarm productivity unexpectedly decreased 0.9% in the second quarter of 2010, the first decline in six quarters, as hours and output increased, the Labor Department reported today.
Unit labor costs increased 0.2% for the quarter ending June 30, the first increase in a year as hourly compensation fell.
Economists expected productivity to increase 0.2% for the quarter and for unit labor costs to increase 1.5%, according to the median estimate from Thomson Reuters.
Productivity for the first quarter, which ended March 31, was revised higher to a 3.9% increase from the previously reported 2.8% gain, as output was revised higher. Unit labor costs fell 3.7% in the first quarter, revised from the 1.3% decrease reported in June.
Second quarter output increased 2.6% and hours increased 3.6%. Labor productivity is measured by dividing an index of real output by an index of hours worked.
Manufacturing productivity increased 4.5% for the quarter and durable goods manufacturing increased 11.2% as an increase in output was stronger than an increase in hours.
Hourly compensation fell 0.7% for the quarter, the largest decrease in five quarters, weighing down unit labor costs. Unit labor costs record 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.
Manufacturing sector unit labor costs declined 6.1% in the second quarter.
For the 12 months ending June 30, productivity increased 3.9% and unit labor costs fell 2.8%.
