US productivity up in Q3, fastest pace in three years

    • Nonfarm productivity, which measures hourly output per worker, increased at a 4.7 per cent annualised rate last quarter, the fastest since the third quarter of 2020.
    • Nonfarm productivity, which measures hourly output per worker, increased at a 4.7 per cent annualised rate last quarter, the fastest since the third quarter of 2020. PHOTO: REUTERS
    Published Thu, Nov 2, 2023 · 09:32 PM

    US WORKER productivity grew at its quickest pace in three years in the third quarter, depressing labour costs.

    Nonfarm productivity, which measures hourly output per worker, increased at a 4.7 per cent annualised rate last quarter, the fastest since the third quarter of 2020, the Labor Department said on Thursday (Nov 2). Data for the second quarter was revised slightly higher to show productivity growing at a rate of 3.6 per cent instead of the previously reported 3.5 per cent pace.

    Economists polled by Reuters had forecast productivity increasing at 4.1 per cent rate. The surge in productivity was flagged by a report last week showing the economy growing at its fastest pace in nearly two years in the third quarter.

    Productivity grew at a 2.2 per cent pace from a year ago.

    The government revised the data going back a few years. Growth in productivity in the second quarter of 2020 was revised up 3.4 percentage points to a rate of 20.7 per cent, making it the fastest since the government started tracking the series in 1947.

    Productivity grew at an annual average rate of 1.2 per cent from the fourth quarter of 2019 to the second quarter of 2023, a downward revision of 0.1 percentage point. The rate of growth in productivity for this business cycle through the third quarter is 1.4 per cent.

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    Nevertheless, the back-to-back hefty increases in productivity will likely be welcomed by Federal Reserve officials. The US central bank held interest rates steady on Wednesday but left the door open to a further increase in borrowing costs in a nod to the economy’s resilience.

    Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 per cent-5.50 per cent range.

    Unit labour costs – the price of labour per single unit of output – fell at a 0.8 per cent rate in the third quarter. They grew at a 3.2 per cent pace in the prior quarter. Unit labour costs rose at a 1.9 per cent rate from a year ago. The moderate annual rise is a step in the right direction towards bringing inflation down to the Fed’s 2 per cent target.

    Hourly compensation rose at a 3.9 per cent pace last quarter after accelerating at a 6.9 per cent rate in the April-June period. It increased at a 4.2 per cent rate from a year ago. REUTERS

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