Productivity in U.S. Rises as Self-Employed Work Fewer HoursShobhana Chandra
Worker productivity unexpectedly grew in the third quarter, reflecting a slump in the number of hours worked by self-employed Americans.
The measure of employee output per hour increased at a 1.6 percent annualized rate, exceeding all estimates of 57 economists surveyed by Bloomberg. The total number of hours worked from July through September dropped by the most in six years, dragged down by an annualized 18 percent plunge among those working for themselves.
“It’s very noisy data,” said Thomas Costerg, senior U.S. economist at Standard Chartered Bank in New York. “The picture is still the same -- we’re in a low-productivity environment and that’s going to continue unfortunately.”
Productivity has struggled to develop a sustained pickup since the U.S. emerged from a recession in 2009, in part because of sluggish business spending and subdued returns on investment in new technology such as computers. Weak efficiency, in addition to crimping corporate profits, limits how fast the economy can expand without generating inflation.
The unexpected advance from the previous quarter notwithstanding, productivity was up just 0.4 percent from the third quarter of last year. By comparison, efficiency gains from 2000 to 2013 averaged 2.1 percent, including annual slowdowns that began in 2011.
The median forecast in a Bloomberg survey called for a 0.3 percent drop in productivity from the prior quarter, with estimates ranging from a decline of 1.5 percent to an advance of
0.9 percent. The reading for the prior three months was revised to show a 3.5 percent gain compared with the last reported increase of 3.3 percent.
Another Labor Department report Thursday showed the number of applications for unemployment benefits climbed more than forecast to reach a five-week high. Jobless claims rose by 16,000 to 276,000 in the week ended Oct. 31, toward the top of the range they’ve been in since the middle of July.
Persistent weakness in productivity is among the concerns noted by several Federal Reserve policy makers. The central bank is weighing whether to increase the benchmark interest rate in December for the first time since 2006.
Expenses per worker increased at a 1.4 percent pace. These so-called unit labor costs, which are adjusted for efficiency gains, were forecast to climb 2.5 percent, according to the Bloomberg survey median.
Total hours worked dropped at a 0.5 percent pace, the biggest decrease since the third quarter of 2009, the figures also showed. Data on hours worked among the nation’s self-employed are volatile.
A decline in hours as output growth slowed at factories helped drive manufacturing productivity up 4.9 percent in the third quarter, the most in four years.
The world’s largest economy expanded at a slower pace in the third quarter as companies took advantage of gains in consumer and business spending to reduce bloated stockpiles, Commerce Department data showed on Oct. 29. Gross domestic product grew at a 1.5 percent annual rate, following a 3.9 percent surge in the second quarter.
Slowing efficiency raises concern because it limits economic growth from gaining momentum in the longer term. The pace at which an economy can expand without stoking inflation -- which economists refer to as its speed limit --reflects the rate of growth of the labor force and how much each worker can produce.
Weaker productivity would therefore indicate advances in GDP will also be restrained in coming years. While economists attribute it to a host of reasons including lack of adequate capital investment and a cooling pace of innovation, there’s also a debate about measurement problems.
The outlook for productivity and its persistent slowdown in recent years has implications for how far and how fast the Fed may raise the benchmark rate once they begin to tighten.
With softer efficiency, businesses’ profits are under pressure. Companies in the Standard & Poor’s 500 Index are projected to post the first back-to-back quarterly earnings decline since 2009, according to Bloomberg data.