Corporate productivity falling

Nonfarm productivity was downwardly revised to -1.8% in the second quarter from an initially-reported -0.9%. Productivity in this sector has risen by 3.7% over the last four quarters. Nonfarm unit labor costs were upwardly revised to 1.1% from an initially-reported 0.2%.

Nonfinancial corporate productivity fell 0.5% in the second quarter but has risen 6.4% over the last four quarters. Unit labor costs in this sector also fell 0.5% in the second quarter and have declined by 5.1% over the last four quarters.

BOTTOM LINE

The revised productivity data do not reveal any new trends in the supply-side performance of the U.S. corporate sector. On a year-over-year basis, productivity growth has been very robust. Labor costs are well under control (nonfinancial unit labor costs fell 0.5% in the quarter and by 5.1% over the last year). This strong productivity and tight control of labor costs has been the source of the strong recovery in corporate profits. The latest data support the view that the growth rate of productivity may be slowing from exceptionally rapid rates and we expect this trend to continue in the second half of the year.

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