U.S. Third-Quarter Productivity Rises by Most in Two Yearsby
Worker productivity rose in the third quarter by the most in two years as the economy picked up steam, offering a respite from the weak efficiency gains that have defined the U.S. expansion.
The measure of employee output per hour increased at a 3.1 percent annualized rate, after a revised 0.2 percent drop in the prior three months, Labor Department figures showed Thursday. The median forecast in a Bloomberg survey called for a 2.1 percent gain. Expenses per worker climbed at a 0.3 percent pace.
The productivity data represent a break from the longest consecutive string of declines since 1979, as employers squeezed more output from existing workers. Efficiency was little changed over the last 12 months, consistent with the long-term downtrend as businesses have been reluctant to invest in equipment, relying instead on more hiring.
“We had a very solid quarter for growth and for productivity,” said Tom Simons, a senior economist at Jefferies LLC. “But it doesn’t do anything to change the long-term decline in productivity.”
Economists’ estimates for third-quarter productivity ranged from no change to a gain of 3.1 percent. The reading for the prior quarter was initially reported as a drop of 0.6 percent.
Over the last five years, annual productivity gains averaged 0.6 percent, the weakest since 1978-1982.
Unit labor costs, which are adjusted for efficiency gains, were forecast to rise an annualized 1.2 percent, according to the Bloomberg survey median. They rose 3.9 percent in the prior quarter, revised from a previously reported advance of 4.3 percent.
Adjusted for inflation, hourly earnings rose at a 1.7 percent rate, after increasing at a 1.2 percent pace.
Output climbed at a 3.4 percent rate, the most in two years, following a 1.6 percent gain the prior quarter.
Hours worked rose at a 0.3 percent pace, the weakest in a year, after a 1.7 percent advance.
Among manufacturers, productivity increased at a 1 percent rate in the third quarter after a 0.5 percent decrease.
The world’s largest economy expanded at a 2.9 percent pace last quarter after an uninspiring first half of the year as the rebuilding of inventories and a soybean-related jump in exports helped cushion softer household spending.
Persistent weakness in productivity is among the concerns noted by Federal Reserve policy makers. The central bank, which kept the benchmark interest rate unchanged at its meeting that ended Wednesday, is weighing whether to increase it in December.
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.
While economists attribute weaker productivity to a host of reasons including lack of adequate capital investment and a cooling pace of innovation, there’s also a debate about how accurately the changes in productivity are being measured.
The trend of slowing productivity reflects “measurement problems in calibrating data to a largely service-oriented economy from a manufacturing oriented one,” Simons said.