Data_Note: UI, Productivity, (Jobs tomorrow)
Productivity growth good...and noisy!
[Figure is updated with added 5-yr moving average to smooth out the noise.]
Unemployment Ins claims for last week came in a touch higher than expected but nothing much to see there. Levels and changes of both initial and continuing claims consistent with still-solid job market.
Productivity growth came in at 1.2% for 22024Q4 (annualized) and 1.6% yr/yr. Those are decent growth rates for what is one of the most important variables we track: output per hour (in the nonfarm biz sector).
Unit labor costs—compensation over productivity—ticked up a bit but at 2.7% yr/yr but is still showing non-inflationary wage pressures, something the Fed likes to see.
Why is productivity the holy grail for many economists? Because boosting output per hour worked is one of the main ways to raise living standards.
Very important caveat: to raise living standards on average. Unless the benefits of productivity growth are broadly shared, living standards won’t rise for all. Put simply, if you’re helping to bake the pie, you oughta get a fair slice!
Here’s the long history of average annual growth in productivity. As you see, it’s like an EKG for someone not doing so well—ie, it’s a very noisy variable (not surprising, as it’s a ratio of two variables—aggregate output and hours—that both jump around).
I’ve added a 5-yr moving avg trend, which shows an uptick in productivity growth in recent years, though it’s too soon to tell if it will stick. If it does—if it settles at ~2% vs. the expected 1.5% , that will be very good news.
Jobs day tomorrow! Estimates for payrolls are in the 150k-200k range (i.e., steady, solid growth) with unemp rate staying ~4.1%, and there will be important revisions to all the key series. Exciting, right?!