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To: Les H who wrote (22208)	8/5/1999 11:02:00 PM
From: Les H	Respond to of 99985

US BLS OFFL: Q2 PRODUCTIVIY HOURLY COMPENSATION JUMP DUE TO MEASUREMENT METHOD By Joseph Plocek WASHINGTON (MktNews) - As analysts continue to scratch their heads over a surprisingly robust 5.1% gain in second quarter non-farm hourly compensation reported Thursday with the quarterly non-farm productivity data, a U.S. Bureau of Labor statistics official confirmed that quirks of the report may be responsible for the jump. "There is no getting around the acceleration in labor compensation costs," said David Orr, chief economist at First Union. He noted there has been a quarterly progression from a 3.8% annual rate in the fourth quarter of 1998, to +4.4% in the first quarter and +5.1% in the second. Moreover, the gain in labor compensation was well above the 4.5% annualized gain seen in the second quarter employment cost index. Phyllis Otto, the BLS manager of analysis and methodology for the quarterly productivity report, said there were a number of possible explanations for the differences from ECI that lessen the surprise. "The ECI holds industry and occupational structure constant, whereas the productivity report does not," she said, adding that the labor compensation component in productivity "is more oriented to the average wage, so a shift to higher-priced workers is equivalent to an increase in costs in the productivity report." Otto noted BLS payroll data showed about a 3% annual rise in highly-paid finance, insurance and real estate jobs over the second quarter. Also, the two surveys do not have the same coverage. "The productivity report includes government workers but not the non-profit sector, accounting for about 10% of the difference in the two measures," Otto said. There also are some trivial differences in what is considered compensation, she said. A good example of this is that under the National Income and Product Account definition used for productivity, tips are wages. Tips, known to rise when the overall economy is strong, are not included in the ECI. Another example is that stock options, to the extent they are reported as income under unemployment insurance claims, are included in the NIPA definition of compensation but not in ECI. There was a more than 5% annualized surge in restaurant jobs -- which largely depend on tip income -- in the second quarter in the current employment survey payroll statistics, which are the source data for labor compensation in the productivity report. The rise in compensation by definition boosted unit labor costs, since ULC is defined as labor compensation per unit of constant dollar output. ULC was up 3.8% in the latest quarter, compared to a gain of 0.8% in the first quarter. Analysts already knew that real GDP, the broadest measure of U.S. output, slowed to a 2.3% gain in the second quarter from a 4.3% increase in the first.