Worker productivity in the U.S. rose in the third quarter by the most since 2014 as the world’s largest economy expanded at a solid pace, a Labor Department report showed Nov. 2 in Washington.
Highlights of Productivity for the Third Quarter
•Measure of nonfarm business employee output per hour increased at 3% annualized rate (estimated 2.6%) after 1.5% pace in previous three months.
•Unit labor costs rose at 0.5% annualized rate (estimated 0.4%) following 0.3% pace.
•Among manufacturers, productivity fell at 5% pace — biggest drop since 1Q 2009, when the economy was in recession — after rising 3.4% in the second quarter; other reports showed hurricanes Harvey and Irma affected factories and the energy sector in the third quarter.
The results are consistent with third-quarter figures last week that showed gross domestic product posted the strongest back-to- back quarters of growth since 2014.
While the recent pickup in productivity is encouraging, a sustained acceleration has remained a challenge during this expansion, holding back the pace of economic growth. One reason: businesses have been cautious in investing in efficiency- boosting technology. That’s starting to change, as recent data show corporate spending on equipment picking up this year.
The latest figure compares with a 1.2% average over the period spanning 2007 to 2016. Weak productivity helps explain why companies are reluctant to raise workers’ wages, even as profit margins have improved.
•Productivity rose 1.5% from the third quarter of 2016; unit labor costs, which are adjusted for efficiency gains, were down 0.1% from a year earlier
•Adjusted for inflation, hourly earnings rose at a 1.5% rate, slowing from a 2.1% increase
•Output rose at a 3.8% rate following 3.9%
•Hours worked rose at a 0.8% pace after 2.4%
With assistance by Jordan Yadoo