Economy

BLS Reports Strong Productivity Growth in the Second Quarter

August 17, 2018

Productivity growth was strong in the second quarter and unit labor costs increased 1.9 percent year over year, according to Steel Market Update’s latest analysis of Bureau of Labor Statistics (BLS) data.

Unit labor costs and productivity changes are reported quarterly by the BLS and results for Q2 2018 were released this week. This basic information is required to truly understand the steel market. One way of looking at GDP is that it is the growth of the working age population multiplied by their productivity. Steel consumption is correlated with the growth of GDP.

In Q2 2018, productivity increased by 0.7 percent quarter over quarter. Figure 1 shows labor productivity in output per hour as an index based on 2012 = 100 and the quarterly change. In the last 10 quarters, with three exceptions, there has been a healthy upward trend in the productivity of nonfarm businesses as a whole.

The bad news is that this is not true of manufacturing. Figure 2 shows the same analysis for manufacturing industries. The productivity growth of manufacturing has been stalled for 8 ½ years following the post-recessionary recovery.

In the second quarter, unit labor costs declined by 0.9 percent based on the previous quarter at an annual rate. Figure 3 shows the change in unit labor costs since Q1 2000 and that the cost increase has been around 2 percent for the last six quarters.