Unit Labour Costs QoQ

Unit Labor Costs track nominal labor cost per unit of real output, where real means adjusted for price change. They equal hourly compensation divided by labor productivity.

The headline series covers the United States nonfarm business sector. Hours cover all people in scope: employees, proprietors and unpaid family workers.

The gauge is not wage growth, total payroll, employment or consumer inflation. It signals pressure on producer costs when pay per hour outruns output per hour. Faster productivity offsets pay gains and lowers costs, while weak productivity lets even moderate pay gains lift costs.

The Bureau of Labor Statistics publishes the series at 8:30 a.m. Eastern Time under embargo. Each quarter brings 2 releases: Preliminary then Revised. Publication usually follows Bureau of Economic Analysis gross domestic product estimates by about 1 week.

The first estimate arrives within 40 days of quarter end, with revisions about 30 days later and again after 60 more days. Each release also reports productivity, output, hours worked, hourly compensation and real hourly compensation. All quarterly moves are seasonally adjusted annualized rates.

Annual source updates revise past values, and errors above 0.1 point trigger urgent correction. Publication waits when source data are unavailable. No survey collects the data directly; the figures are derived from employment, pay and output sources of other programs.

Costs move with the balance between pay per hour and output per hour.

• Hourly compensation: nominal pay plus benefits and taxes per hour; higher values push costs up.
• Labor productivity: real output divided by hours worked; higher values push costs down.
• Real output: price adjusted value added for business sectors; manufacturing uses a separate sectoral method that is not directly comparable.
• Hours worked: time worked by all people in the sector, converted from paid hours and adjusted for leave.
• Real hourly compensation: hourly compensation divided by consumer prices; shown as context for pay power.

One past revised release for a first quarter showed nonfarm productivity down 7.3% as output fell 2.3% while hours rose 5.4%. Hourly compensation rose 4.4%, so unit labor costs jumped 12.6% and stood 8.2% higher over 4 quarters. The first estimate had shown 11.6%, so a pay revision alone added a full point, and manufacturing costs were revised from 2.1% to 5.7%. The lesson: read pay with output, hours and productivity together, never pay alone.

1. Real output: build a chain weighted Fisher ideal index of real value added, excluding government, nonprofits, household staff and imputed housing rent.
2. Hours worked: convert paid hours to worked hours, remove leave, add proprietor and family hours, then seasonally adjust the series.
3. Hourly compensation: divide nominal compensation, including wages, supplements, benefits and taxes, by hours worked, imputing proprietor pay at the employee rate.
4. Labor productivity: divide the real output index by the hours worked index.
5. Unit labor costs: divide hourly compensation by labor productivity; matched pay and productivity growth leaves costs flat.
6. Presentation: express the series as indexes, keep indexes to 3 decimals, and publish rates to 1 decimal as seasonally adjusted annualized moves.