Productivity Rises, Costs Fall for Q1 2013


Americans are working more for less pay, according to a Q1 Productivity and Costs report (link opens in PDF) released today by the Labor Department.

Nonfarm business sector labor productivity bumped up an annualized 0.5% for Q1, driven primarily by a quarter-to-quarter 2.6% improvement in output and a 1.6% increase in hours worked. After improving 0.7% in Q4 2012, analysts had expected similar gains for Q1 2013.

But where productivity didn't quite pack the punch, cheaper labor surprised analyst estimates. Predictions called for a concurrent 0.5% increase in costs, but unit labor costs plummeted 4.3% after jumping 11.8% the previous quarter (a calculation error had previously pinned costs up 0.5% in the previous quarter).

The combination of a 3.8% decrease in hourly wages, as well as the aforementioned 0.5% productivity boost were the main drivers behind May's cost cutting.


For manufacturing, productivity headed 3.5% higher, while labor costs fell 10%. For all nonfinancial corporations, productivity bumped up a relatively small 0.3%.

Comparing this quarter to Q1 2012, productivity has managed 0.9% gains, while unit labor costs are up 1.1%.


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