US third-quarter productivity revised higher; labour costs much weaker
US WORKER productivity grew faster than initially thought in the third quarter, putting more downward pressure on labour costs, a trend that if sustained could contribute to lower inflation.
Nonfarm productivity, which measures hourly output per worker, increased at a 5.2 per cent annualised rate last quarter, the Labor Department’s Bureau of Labor Statistics said on Wednesday (Dec 6). That was revised up from the previously reported 4.7 per cent pace and was the quickest since the third quarter of 2020.
Economists polled by Reuters had forecast productivity growth being revised higher to 4.9 per cent rate.
The upgrade was telegraphed last week by revisions to gross domestic product data, which showed the economy growing at a 5.2 per cent rate in the July-to-September quarter, instead of the previously reported 4.9 per cent pace.
Productivity grew at an unrevised 3.6 per cent pace in the second quarter. Productivity expanded at a 2.4 per cent pace from a year ago, revised up from the previously estimated 2.2 per cent rate.
Unit labour costs – the price of labour per single unit of output – decreased at a 1.2 per cent rate in the third quarter. They were initially estimated to have declined at a 0.8 per cent pace. Unit labour costs increased at a 2.6 per cent rate in the second quarter, revised down from the previously reported 3.2 per cent pace.
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They rose at a 1.6 per cent rate from a year ago, instead of the 1.9 per cent reported last month.
The moderate annual labour costs bode well for the Federal Reserve’s fight to lower inflation to the Fed’s 2 per cent target.
Following a raft of data showing subsiding inflation and easing labour market conditions, financial markets believe the US central bank could start cutting interest rates as soon as next March. Since March 2022, the central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25 per cent-to-5.50 per cent range.
Hourly compensation rose at an unrevised 3.9 per cent pace last quarter. It increased at a downwardly revised 4.0 per cent rate from a year ago. Annual compensation was previously reported to have risen at a 4.2 per cent rate. REUTERS
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