Productivity Gains Exceed Forecasts Even as Output Cools
Productivity gains in the U.S. last quarter exceeded forecasts though were little changed from the prior reading as output and hours worked both cooled, with efficiency improvements surpassing the recent average for a third period.
Non-farm business employee output per hour increased at a 1.9% annualized rate, according to Labor Department figures March 7 that were delayed a month by the government shutdown. That compared with the 1.5% median estimate in a Bloomberg survey of economists and followed a downwardly revised 1.8% in the third quarter. Unit labor costs rose at a 2% rate following 1.6%.
The data indicate employers may be starting to coax more output from workers, a development that could aid growth just as analysts project the economy will decelerate this year. Productivity growth has averaged 1.3% from 2007 to 2018, compared with 2.7% from 2000 to 2007, according to Labor Department figures that included historical revisions on March 7.
The productivity figures partly reflect a cooling in economic growth last quarter. The report showed gains in output eased to 3.1% from 4%, while the increase in hours worked fell to 1.2% from 2.1%.
Trump administration officials say that the Republican-backed tax cuts will fuel a jump in productivity as corporations invest in equipment that can boost output and increase worker pay. While business spending has picked up over the past year, it remains to be seen whether there will be a sustained acceleration in efficiency.
