US: Labor productivity picked up modestly to 1.3% in Q2 - Nomura

Analysts at Nomura explain that as US economic activity grew strongly in Q2 along with steady improvement in labor markets, labor productivity (real output per hour) jumped at an annualized pace of 2.9% q-o-q in the quarter.

Key Quotes

“While aggregate working hours grew by 1.9%, output growth outpaced labor inputs, increasing by 4.8%. As a result, unit labor costs fell 0.9% from the previous quarter while unit non-labor payment soared 9.6%. Note that non-labor payment includes non-labor costs as well as profits. Thus, the 9.6% gain in unit non-labor payment was likely a reflection of higher profits.”

“In coming quarters, economic growth will likely moderate, suggesting slower labor productivity growth as well. On a y-o-y basis, labor productivity picked up modestly to 1.3% in Q2, from 1.0% in Q1.”

“The current pace of labor productivity growth seems consistent with a potential economic growth of 1.7-2.0%. Unit labor costs, a measure of inflationary pressure from labor markets, continued a trend-like increase of 1.9% y-o-y in the quarter following 2.0% previously.”