Briefing.com: Productivity-Prel

Updated: 07-May-26 09:23 ET

Q1 Productivity-Prel

Updated: 07-May-26 09:23 ET

Highlights

Nonfarm business sector labor productivity increased 0.8% in the first quarter (Briefing.com consensus: 1.8%) following a downwardly revised 1.6% increase (from 1.8%) in the fourth quarter.
Unit labor costs rose 2.3% (Briefing.com consensus: 2.7%) on the heels of an upwardly revised 4.6% increase (from 4.4%) in the fourth quarter.

Key Factors

The increase in productivity was the result of output increasing 1.5% and hours worked increasing 0.7%. From the same quarter a year ago, nonfarm business sector labor productivity increased 2.9%.
The increase in unit labor costs stemmed from a 3.1% increase in hourly compensation and a 0.8% increase in productivity.
Manufacturing sector labor productivity increased 3.6%, as output decreased 3.3% and hours worked decreased 0.4%. Unit labor costs in the total manufacturing sector increased 2.4%, driven by a 6.1% increase in hourly compensation and a 3.6% increase in productivity.

Big Picture

The key takeaway from the report is that, while productivity undershot expectations, unit labor costs decelerated in a move that should placate inflation hawks at the Fed. That won't change the prevailing belief that the Fed isn't going to be cutting rates soon, but it will temper some of the budding fears about entertaining the idea of a rate hike.