This Morning’s Key Economic Data - Weekly Jobless Claims (10-31) and Q3 Productivity

November 5, 2009 – This morning’s key economic data includes Q3 Productivity and Costs, as well as weekly jobless claims. The productivity number came in well ahead of expectations at a 9.5% annual rate (expectations were 6.5%). While costs fell by 5.2% which is also positive, indicating that inflation is not yet an issue.

Excerpts from Press Releases

PRODUCTIVITY AND COSTS - Third Quarter 2009, Preliminary 

Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This was the largest gain in productivity since the third quarter of 2003, when it rose 9.7 percent. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors, and unpaid family workers. Output increased 4.0 percent and hours worked decreased 5.0 percent in the third quarter of 2009 (All quarterly percent changes in this release are seasonally adjusted annual rates).

From the third quarter of 2008 to the third quarter of 2009, nonfarm business output fell 3.5 percent and hours worked fell faster, 7.5 percent, resulting in a productivity increase of 4.3 percent (tables A and 2).The four-quarter decline in hours was the largest in the series, which begins in 1948. Nonfarm business productivity rose 1.8 percent in 2008, and 2.6 percent per year on average during the 2001-2007 period corresponding to the last complete business cycle.

Unit labor costs in nonfarm businesses fell 5.2 percent in the third quarter of 2009; the increase in productivity outpaced the increase in hourly compensation. Unit labor costs declined 3.6 percent over the last four quarters--the largest decrease since the series began in 1948 (tables A and 2). BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.

Productivity increased 9.8 percent in the business sector in the third quarter of 2009. This was the largest increase in the series since the second quarter of 1972. Unit labor costs decreased 5.1 percent during the third quarter of 2009 (tables A and 1).

Manufacturing sector productivity grew 13.6 percent in the third quarter of 2009, as output increased 7.7 percent despite a 5.2 percent decrease in hours worked.  This was the largest increase in the quarterly productivity series, which begins in 1987. Over the last four quarters, manufacturing productivity increased 3.1 percent as output and hours declined 10.8 percent and 13.5 percent respectively (tables A and 3). Manufacturing sector productivity increased 0.8 percent in 2008, and at an average annual rate of 4.0 percent from 2001 to 2007.

In the third quarter of 2009, changes in productivity, output, and hours were larger in durable goods producing industries than in nondurable goods industries (tables A, 4 and 5).

Manufacturing unit labor costs fell at a 7.1 percent annual rate in the third quarter of 2009, but increased 2.3 percent over the last four quarters (tables A and 3). 

The data sources and methods used in the preparation of the manufacturing output series differ from those used in preparing the business and nonfarm business output series, and these measures are not directly comparable. See Technical Notes for further information on data sources.

Revised measures

In the second quarter of 2009, nonfarm business productivity growth was revised up to 6.9 percent, reflecting declines in output and hours of 1.1 percent and 7.5 percent, respectively. Unit labor costs were revised down due to the upward revision in productivity. In the manufacturing sector, revised second quarter productivity growth was 6.8 percent, a 1.9 percentage point upward revision. Manufacturing unit labor costs declined 1.6 percent, rather than rising 0.2 percent as reported September 2.

In the nonfinancial corporate sector, revised data for the second quarter of 2009 show that productivity increased 6.6 percent, as output per hour was revised up along with output; hours were unrevised. After revision, unit labor costs fell 4.5 percent in the second quarter, but rose 1.4 percent from the second quarter of 2008 to the second quarter of 2009.  Unit profits grew at a 23.0 percent annual rate in the second quarter of 2009.

UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT - SEASONALLY ADJUSTED DATA

In the week ending Oct. 31, the advance figure for seasonally adjusted initial claims was 512,000, a decrease of 20,000 from the previous week's revised figure of 532,000. The 4-week moving average was 523,750, a decrease of 3,000 from the previous week's revised average of 526,750.

The advance seasonally adjusted insured unemployment rate was 4.4 percent for the week ending Oct. 24, unchanged from the prior week's unrevised rate of 4.4 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Oct. 24 was 5,749,000, a decrease of 68,000 from the preceding week's revised level of 5,817,000. The 4-week moving average was 5,886,250, a decrease of 79,500 from the preceding week's revised average of 5,965,750.  

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 480,178 in the week ending Oct. 31, a decrease of 14,216 from the previous week. There were 466,341 initial claims in the comparable week in 2008.

The advance unadjusted insured unemployment rate was 3.7 percent during the week ending Oct. 24, a decrease of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,915,719, a decrease of 69,231 from the preceding week. A year earlier, the rate was 2.5 percent and the volume was 3,310,892.

Extended benefits were available in Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, and Wisconsin during the week ending Oct. 17.

Initial claims for UI benefits by former Federal civilian employees totaled 2,069 in the week ending Oct. 24, an increase of 174 from the prior week. There were 2,507 initial claims by newly discharged veterans, an increase of 90 from the preceding week.

There were 21,660 former Federal civilian employees claiming UI benefits for the week ending Oct. 17, an increase of 443 from the previous week. Newly discharged veterans claiming benefits totaled 33,900, an increase of 819 from the prior week.

States reported 3,459,148 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Oct. 17, an increase of 90,239 from the prior week. There were 836,629 claimants in the comparable week in 2008. EUC weekly claims include both first and second tier activity. The highest insured unemployment rates in the week ending Oct. 17 were in Puerto Rico (6.4 percent), Nevada (5.4), Oregon (5.4), California (4.9), Pennsylvania (4.9), Arkansas (4.8), Wisconsin (4.8), Michigan (4.7), Alaska (4.6), North Carolina (4.6), and South Carolina (4.6). The largest increases in initial claims for the week ending Oct. 24 were in California (+14,394), North Carolina (+3,190), Oregon (+3,131), Georgia (+2,549), and New York (+2,287), while the largest decreases were in Indiana (-2,346), Puerto Rico (-1,479), Iowa (-969), Nevada (-605), and Florida
(-544).