Second Quarter Productivity Grows

A bounce back for output gave first-quarter productivity a lift, up a quarter-to-quarter 1.3 percent vs a revised decline of 1.1 percent in the first quarter. The bounce in output also held down unit labor costs which rose 0.5 percent vs 2.3 percent in the first quarter. Output in the second quarter rose 2.8 percent vs a depressed 0.5 percent in the first quarter. Compensation rose 1.8 percent, up from 1.1 percent in the first quarter, while hours worked were little changed, up 1.5 percent vs 1.6 in the first quarter. Looking at year-on-year rates, growth in productivity is very slight at only plus 0.3 percent while costs do show some pressure, up 2.1 percent in a reading, along with the rise in compensation, that will be welcome by Federal Reserve officials who are hoping that gains in wages will help offset weakness in commodity costs and help give inflation a needed boost.

Recent History Of This Indicator: Productivity and costs are both expected to posts increases in the second quarter, up 1.6 percent for productivity and reflecting the bounce back for GDP and up 0.5 percent for costs. But Econoday's sample is uncertain for costs with the low estimate at a steep minus 1.2 percent. Should costs cool, it would follow large gains in the prior two quarters.