U.S. Productivity Revised Upward to 2.3% in Third Quarter -- Update
December 06 2018 - 10:01AM
Dow Jones News
By Eric Morath
WASHINGTON -- U.S. worker productivity rose at a faster pace
than initially estimated in the third quarter, but the broader
trend remains one of lackluster improvement.
The productivity of nonfarm workers, measured as the output of
goods and services for each hour on the job, increased at a 2.3%
seasonally adjusted annual rate in the third quarter, the Labor
Department said Thursday. That was a slight upward revision from
the initial estimate of a 2.2% gain released last month. Still, the
third-quarter gain was a deceleration from the 3% advance in the
second quarter.
A gauge of compensation costs, unit labor costs, increased at a
0.9% annual rate in the July-to-September period. That was a
downward revision from the initial estimate of a 1.2% increase.
Unit labor costs fell at a revised 2.8% pace in the second
quarter.
Cooling labor costs are the latest signal of easing inflation
pressures.
Economists surveyed by The Wall Street Journal had forecast the
revised third-quarter figures to show a 2.2% increase in
productivity from the prior quarter, and labor costs to increase at
a 1.1% rate.
Thursday's report was issued a day later than initially
scheduled. The federal government was closed Wednesday due to a
national day of mourning for former President George H.W. Bush.
From a year earlier, productivity rose at a 1.3% rate in the
third quarter. Year-over-year productivity gains have held below 2%
since late 2010, the longest such streak on records back to
1948.
Economists forecast the pace of economic output gains to ease in
the fourth quarter, while hiring was strong in October, which
suggests worker-productivity improvements could ease in the final
months of the year.
That's a potential challenge for workers and the broader
economy. Over the longer run, productivity growth is a predictor of
wage growth. If workers can't produce more per hour, it can make it
difficult for businesses to justify pay increases. At the same
time, businesses' willingness to spend on efficiency-improving
technology has been held in check during much of the expansion.
And with a smaller pool of workers available in a tight labor
market, productivity would likely need to accelerate in 2019 to
meet the Trump administration's goal for a sustained 3% economic
growth rate.
Thursday's report showed productivity gains in the manufacturing
sector rose at an upwardly revised 1% annual pace from the previous
estimate of up 0.5%.
Unit labor costs also rose 0.9% in the third quarter from a year
earlier. On a year-over-year basis those costs have been trending
down over the past year -- another sign of easing inflation
pressures. If costs are in check, it is easier for businesses to
maintain their profit margins without having to raise prices.
The falling cost of oil and strong U.S. dollar making foreign
goods relatively less expensive for domestic consumers are also
putting downward pressure on price increases.
Write to Eric Morath at eric.morath@wsj.com
(END) Dow Jones Newswires
December 06, 2018 09:46 ET (14:46 GMT)
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