Worker Productivity Rises More Than Expected

Productivity has burst out of its slump, rising at a better-than-expected annualized pace of 3.1 percent in the third quarter. A revision to the second quarter also offers good news, 4 tenths improved but still negative at minus 0.2 percent in what was a third straight losing quarter in one of the worst runs in the long record of this report.

The third-quarter breakdown shows a surge in output, more than doubling to a 3.4 percent growth rate at the same time that growth in hours worked slowed sharply, to a 0.3 percent rate vs the second-quarter's 1.7 percent. Greater efficiency between output and hours worked holds down labor costs which rose only 0.3 percent which is much better than expectations.

Expectations for fourth-quarter growth are mostly positive, roughly at the same rate of the third quarter in what would set up another set of favorable productivity readings.

Recent History Of This Indicator:
First estimate for third-quarter non-farm productivity is expected to post the first gain in four quarters, at a plus 2.2 percent annualized rate. The expected gain is tied to improved third-quarter growth that in turn should limit unit labor costs which are expected to moderate to plus 1.4 percent from the second-quarter's sharp 4.3 percent increase.