Economy

Higher Unit Labor Costs Eat Into Productivity Gains for 2015

Jon C. Ogg

Published: March 3, 2016 10:35 am

Last Updated: January 13, 2020 12:25 pm

We have already seen a slightly better gross domestic product (GDP) revision for the fourth quarter of 2015, but we also saw that the reason for that higher revision made things worse rather than better. Now the U.S. Bureau of Labor Statistics (BLS) has made a revision to its 2015 productivity and unit labor costs.

The BLS reported on Thursday that nonfarm business sector labor productivity fell by 2.2% on an annualized basis in the fourth quarter of 2015. Output was shown to have increased by 1.0% and hours worked increased by 3.2%. Those quarterly percentage changes in this release were reported as seasonally adjusted annual rates.

From the fourth quarter of 2014 to the fourth quarter of 2015, productivity rose by 0.5%, and the annual average productivity increased by 0.7% from 2014 to 2015.

Unit labor costs in the nonfarm business sector rose by 3.3% in the fourth quarter of 2015. That was gain was marked by a gain of 1.1% in hourly compensation and by a 2.2% decrease in productivity. Unit labor costs were up by 2.1% over the past four quarters.

It is interesting that productivity is on the decline at the same time that labor costs are rising. That being said, output was still up, so it seems that the drop is simply by unit labor costs.