Productivity and Unit Labor Costs Rise More Than Estimates

- Preliminary 2Q Non-farm Productivity rose 1.1% versus estimates of a .8% increase and an upwardly revised 4.3% gain in 1Q.
- Preliminary 2Q Unit Labor Costs rose 4.2% versus estimates of a 3.7% gain and an upwardly revised 2.5% increase in 1Q.

BOTTOM LINE: US productivity gains eased and labor costs rose the most since the end of 2004, Bloomberg reported. Hours worked rose at a 1.4% pace in 2Q versus a 2.3% gain the prior quarter. Productivity at non-financial companies which is reported with a one-quarter lag, a gauge closely monitored by the Fed, soared 7.2% in the first quarter. The 10-year yield is only 1 basis point higher on this report. I continue to believe productivity will remain relatively high and unit labor costs will stay subdued over the intermediate-term.