Productivity And Growth Grow In Third Quarter

This year's pickup in the economy combined with thin wage growth is helping to improve productivity and unit labor costs, the former unrevised at a 3.0 percent annualized rate in the third quarter with the latter down 0.2 percent from an initial plus 0.5 percent. Output, at annualized growth of 4.1 percent, and hours worked, rising at a 1.1 percent pace, were both revised 3 tenths upward to keep productivity unchanged, while compensation was revised 8 tenths lower 2.7 percent to pull down costs.

Underscoring the weakness in wages is a downward revision to second-quarter labor costs which are revised from a 0.3 percent gain to a 1.2 percent decline. Second-quarter productivity growth holds at 1.5 percent. Real compensation growth in the third quarter, that is adjusted for inflation, is now at plus 0.7 percent, down from an initial rise of 1.5 percent.

The third quarter was a strong one for output that outpaced recent quarters, evident in year-on-year rates that show less strength for productivity, at only 1.5 percent. Year-on-year unit costs were down 0.7 percent in the quarter.

Gains in output that outstrip gains in hours worked is a healthy combination. The question is whether and when full employment will begin to drive up wages.

Recent History Of This Indicator:
Third-quarter GDP was revised 3 tenths higher to 3.3 percent which points to added strength for third-quarter productivity and to additional easing for labor costs. Forecasters see nonfarm productivity rising 3.2 percent in the second estimate vs 3.0 percent in the first estimate with unit labor costs up 0.3 percent vs an initial 0.5 percent.