Worker Productivity Rises, Costs Decline

Growth in output jumped at the same time that hours worked slowed, making for a very strong 2.9 percent annualized rate for second-quarter nonfarm productivity that is right at the top of Econoday's consensus range. The second quarter also saw a slowing in compensation which made for a sharp 0.9 percent decline in unit labor costs.

Output rose at a very hot 4.8 percent rate in the quarter, up from an already solid 2.6 percent rate in the first quarter. Hours worked rose at a 1.9 percent rate vs the first quarter's 2.6 percent. But workers aren't benefiting much from all the production as nominal compensation fell to a 2.0 percent rate from 3.7 percent in the first quarter. When adjusting for inflation, real compensation rose 0.3 percent and was little changed from the first quarter's 0.2 percent rate.

Wages aside, this is a very strong report that speaks to the robust health right now of the business sector.