US: Unit labor costs rise 4.2% in Q1, vs. 6% forecast

• First quarter unit labor costs in the US are revised down to 4.2% from 6.3%.
• The dollar fell after the data was released, offsetting the impact of ADP.

Non-farm business sector labor productivity decreased by 2.1% in the first quarter of 2023. Labor productivity was revised upwards by 0.6%, the combined effect of an upward revision of 0.3% of output and a downward revision of 0.4% of the hours worked.

“With respect to the same quarter of the previous year, the labor productivity of the non-agricultural business sector decreased by 0.8%, reflecting a 1.4% increase in production and a 2.2% increase in hours worked. The decrease in productivity of 0.8 % is the first time that the quarterly change series has remained negative for five consecutive quarters; this series begins in the first quarter of 1948,” the Bureau of Labor Statistics stated.

“Unit labor costs in the nonfarm business sector increased 4.2% in the first quarter of 2023, reflecting a 2.1% increase in hourly compensation and a 2.1% decline in productivity. Unit labor costs increased 3.8% in the last four quarters”, adds the publication. Unit labor costs in the manufacturing sector increased 3.1% in the first quarter, reflecting a 0.5% increase in hourly compensation and a 2.5% decline in productivity. In the same quarter of the previous year, manufacturing CLUs increased by 4.5%.

Market reaction:

The ULC report is generally moderately reacted to, but the strong revision shows less inflationary pressures than initially reported. The dollar weakened after the report was released and US yields fell, offsetting the reaction to the ADP jobs report release, which beat expectations. The DXY turned negative on the day, and fell towards 104.00.