Productivity decreases 7.5% in Q1 2022; unit labor costs increase 11.6% (annual rates)

[mahatmakanejeeves]

Productivity decreases 7.5% in Q1 2022; unit labor costs increase 11.6% (annual rates)

Economic News Release USDL 22-0786

Productivity and Costs, First Quarter 2022, Preliminary


Transmission of material in this release is embargoed until 8:30 a.m. (ET) Thursday, May 5, 2022

Technical information: [phone] • [e-mail] • www.bls.gov/productivity
Media contact: [phone] • [e-mail]

PRODUCTIVITY AND COSTS
First Quarter 2022, Preliminary

Nonfarm business sector labor productivity decreased 7.5 percent in the first quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 2.4 percent and hours worked increased 5.5 percent. This is the largest decline in quarterly productivity since the third quarter of 1947, when the measure decreased 11.7 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, nonfarm business sector labor productivity decreased 0.6 percent, reflecting a 4.2-percent increase in output that was outpaced by a 4.8-percent increase in hours worked. This is the largest four-quarter decline since the fourth quarter of 1993, when the measure also declined 0.6 percent. (See table A1.)

Unit labor costs in the nonfarm business sector increased 11.6 percent in the first quarter of 2022, reflecting a 3.2-percent increase in hourly compensation and a 7.5-percent decrease in productivity. Unit labor costs increased 7.2 percent over the last four quarters. (See table A1.) This is the largest four-quarter increase in this measure since an 8.2-percent increase in the third quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them.

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The revised Productivity and Costs news release for first-quarter 2022 is scheduled to be released on Thursday, June 2, 2022 at 8:30 a.m. (ET).

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[progree]

1. This is very bad. Supply chain? (nt)

[mahatmakanejeeves]

2. I didn't notice it until I posted the payroll employment report this morning. NT

[LostinRed]

3. What does this mean

I dont know anything about economics. I guessing it is a sign of potential layoffs? Since labor cost are high and productivity is low?

[mahatmakanejeeves]

4. U.S. weekly jobless claims rise; productivity plunges at fastest pace in 74 years

Macro Matters

May 5, 2022
4:33 PM EDT
Last Updated 7 days ago

U.S. weekly jobless claims rise; productivity plunges at fastest pace in 74 years

By Lucia Mutikani

{snip}

Rising labor costs were reinforced by a third report from the Labor Department showing worker productivity plummeting at its sharpest pace in more than 74 years in the first quarter, suggesting that the Fed cannot, for now, rely on workers being more productive to rein in inflation.

Nonfarm productivity, which measures hourly output per worker, plunged at a 7.5% annualized rate last quarter, the deepest slide since the third quarter of 1947. That followed a 6.3% growth pace in the fourth quarter.

But last quarter's plunge likely exaggerates the pace of decline in productivity, which was flagged in last week's first-quarter gross domestic product report. The economy contracted at a 1.4% rate in the January-March period.

Productivity fell at only a 0.6% pace from a year ago. It has been volatile since the start of the COVID-19 pandemic more than two years ago. Hours worked increased at a 5.5% rate in the first quarter. Unit labor costs - the price of labor per single unit of output - shot up at an 11.6% rate. That followed a 1.0% growth pace in the October-December quarter. Unit labor costs increased at a 7.2% rate from a year ago.

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