U.S. labor productivity increases much more than anticipated in the second quarter

The preliminary data from the U.S. Labour Department showed on Friday that nonfarm business sector labor productivity in the United States surged 7.3 percent q-o-q in the second quarter of 2020, as output declined 38.9 percent q-o-q and hours worked fell 43.0 percent q-o-q (seasonally adjusted). This was the

largest quarterly increase since the second quarter of 2009.

This was well above economists’ forecast for a 1.5 percent q-o-q advance after a revised 0.3 percent q-o-q drop in the first quarter (originally a 0.9 percent q-o-q decline).

In y-o-y terms, the labor productivity rose 2.2 percent in the second quarter, reflecting an 11.8-percent decline in output and a 13.7-percent fall in hours worked.

Meanwhile, unit labor costs in the nonfarm business sector in the second quarter jumped 12.2 percent q-o-q compared to a revised 9.8 percent q-o-q climb in the prior quarter (originally a 5.1 percent q-o-q gain). This was the largest increase in this measure since the first quarter of 2014.

Economists had forecast a 6.2 percent surge in second-quarter unit labor costs.

Unit labor costs quarterly increase reflected a 20.4-percent q-o-q surge in hourly compensation and a 7.3-percent advance in productivity.

Compared to the corresponding period of 2019, unit labor costs rose 5.7 percent.