A simple summary of the headlines for this release is that the growth of productivity improved while the labor costs grew less than productivity (headline quarter-over-quarter analysis). The year-over-year analysis gives one the opposite view.

Analyst Opinion of Productivity and Costs

Although many times the data is significantly revised between releases – it did not happen in this release. But IF I believed this data, costs are rising significantly whilst productivity is in the toilet (as I only look at year-over-year data – the headline compounding distorts the view). 

The market was expecting:

seasonally adjusted quarter-over-quarter at annual rate Consensus Range Consensus Preliminary Actual Final Actual Nonfarm productivity 2.9 % to 3.3 % +3.3 % +3.1 % +3.1 % Unit labor costs 0.0 % to 1.3 % +0.3 % +0.3 % +0.7 %

The headlines annualize quarterly results (Econintersect uses year-over-year change in our analysis). If data is analyzed in year-over-year fashion, non-farm business productivity was unchanged year-over-year, and unit labor costs were up 3.0 % year-over-year. Bottom line: the year-over-year data is saying that costs are rising faster than productivity.

Please note that the following graphs are for a sub-group of the report nonfarm > business.

Seasonally Adjusted Year-over-Year Change in Output of Business Sector

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Seasonally Adjusted Year-over-Year Change of Output per Hour for the Business Sector

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All this is happening while business sector unit labor costs increased.

Seasonally Adjusted Year-over-Year Rate of Change of Unit Labor Costs

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The headlines from the press release:

Nonfarm business sector labor productivity increased at a 3.1-percent annual rate during the third quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 3.6 percent and hours worked increased 0.5 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The quarterly increase in nonfarm business sector labor productivity was the first increase after three consecutive declines in the measure. From the third quarter of 2015 to the third quarter of 2016, productivity was unchanged. (See chart 1)

Unit labor costs in the nonfarm business sector increased 0.7 percent in the third quarter of 2016, reflecting a 3.8-percent increase in hourly compensation and a 3.1-percent increase in productivity. Unit labor costs increased 3.0 percent over the last four quarters. (See chart 2)

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