3Q Productivity rises 1.9%

U.S. workers’ productivity rose at a 1.9% annual rate in the third quarter, the Labor Department reported.

The level was lower than economists’ median estimate of 2.2%, Bloomberg News reported.

The measure of employee output per hour was revised the prior three months to show a 1.8 % increase that was smaller than previously estimated, said Bloomberg.

“Companies can’t count on productivity growth to meet increased demand — they’re going to need to hire as well,” Gus Faucher, senior economist at PNC Financial Services Group Inc., said according to Bloomberg. “Particularly given the fact that the October jobs number was quite good, we might see slowing in productivity growth in the fourth quarter.”

Labor costs were forecast to decrease 0.1% according to economists’ median estimate, said Bloomberg.

When worker efficiency improves at a slower pace and labor becomes more expensive, companies may raise prices in order to guard their profits, contributing to more rapid inflation.