Productivity: Declined As Labor Costs Jumped

Bottom Line: The final reading of productivity and costs for the 2nd Quarter showed the second consecutive Quarter of productivity declines was a bit less negative than previously reported. Output declines were modestly less than previously reported, with compensation costs still high but nearly unchanged, resulting in lower unit labor costs. Overall, slower economic activity has hurt productivity, but businesses are uncertain about the outlook and reluctant to reduce payrolls or cut hours coming off a very tight labor market.

Nonfarm Business Productivity was REVISED UP by 0.5 percentage points and fell by  4.1% in 2022 Q2, compared with market expectations for an upward revision to a decline of 4.3%.   This revision pushed the year-on-year growth rate of labor productivity to -2.4%.
         
Output was revised modestly higher, from -2.1% to -1.4%, reflecting the recent adjustment in 2022 Q2 nonfarm business GDP.
 
Hours Worked was revised up to 2.7% from 2.6%, reflecting the recent revisions to employment.  Compensation was revised slightly higher, from 5.7% to 5.7%. Over the past year, compensation has risen by 6.7%.  As a result of these adjustments, Unit Labor Costs were REVISED DOWN from 10.8% to 10.2%. Over the past year, unit labor costs have increased by 9.3%.