1Q2020 Final Headline Productivity Hit By The Coronavirus

A simple summary of the headlines for this release is that labor costs are growing significantly faster than productivity on a quarter-over-quarter and year-over-year basis - and the pandemic has caused productivity to crater.

Analyst Opinion of Productivity and Costs

The overall view this quarter is that productivity is up 0.7 % from the same quarter one year ago while unit costs are up 1.9 %.

Please note my productivity analysis at the end of this post which is at odds with the headline view. Doing a productivity analysis during a major recession is a waste of time.

Note the following from the BLS:

BLS quarterly estimates of labor productivity combine output data with hours worked data based primarily on the Current Employment Statistics (CES) survey. The reference period for the CES largely predated many of the COVID-19-related job losses that occurred in the latter part of March. To capture these job losses, adjustments were made to March employment, based on the Department of Labor's Employment and Training Administration weekly reports of the number of initial claims for unemployment insurance benefits. Hours and related measures—including labor productivity—for the first quarter of 2020 reflect these adjustments.

The market was expecting from Econoday:

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Annualized snippets of monthly or quarterly data distort what is going on. In reality, productivity growth is near post-Great Recession highs using a year-over-year analysis.

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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 are growing.

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 decreased 0.9 percent in the first quarter of 2020, the U.S. Bureau of Labor Statistics reported today, as output decreased 6.5 percent and hours worked decreased 5.6 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2019 to the first quarter of 2020, productivity increased 0.7 percent, reflecting no change in output and a 0.7-percent decrease in hours worked.

Preliminary Chart for 1Q2020

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