Productivity Rises in Third Quarter
The productivity of U.S. workers rose more than projected in the third quarter, helping to contain labor costs even as employment picks up.
The measure of employee output per hour increased at a 2% annualized rate, after a revised 2.9% pace in the prior three months that was stronger than previously estimated, a Labor Department report showed in Washington.
The median forecast in a Bloomberg News survey of 58 economists called for a 1.5% advance. Expenses per worker increased at a 0.3% pace, less than projected.
Businesses have been wringing more efficiency from their workforces to control costs as the economic expansion has been slow to gain momentum.
“The productivity numbers are respectable,” Shepherdson, chief economist at Pantheon Macroeconomics Inc. said in a research note. The labor costs data indicates there is “no inflation risk,” he said.
Economists’ estimates for productivity ranged from gains of 0.3% to 2.1%. The prior quarter’s reading was previously reported as an advance of 2.3%.
Unit labor costs, which are adjusted for efficiency gains, were forecast to rise 0.5% in the third quarter, according to the Bloomberg survey median. They dropped at a 0.5% pace in the prior quarter, revised from an initially reported decrease of 0.1%.
Adjusted for inflation, hourly earnings increased at a 1.2% rate, after declining at a 0.7% pace in the second quarter.
Among manufacturers, productivity increased at a 3.2% rate.
Worker efficiency climbed 0.9% in the third quarter from the same time in 2013, while labor costs rose 2.4%.
The third-quarter reading on productivity was close to the 2.2% average over the period spanning 2000 to 2012, the report showed.
Improving efficiency helps economic growth to gain momentum in the longer term. The pace at which an economy can grow without stoking inflation, which economists term its speed limit, reflects the rate of growth of the labor force plus how much each worker can produce.
Recent reports indicate the economic expansion remains on track in its sixth year since the recession ended in June 2009.
The U.S. expanded at a 3.5% annualized rate from July through September, after growing 4.6% in the second quarter, according to Commerce Department data. It marked the strongest back-to-back readings since the last six months of 2003.
Employers added 248,000 workers in September, while the unemployment rate fell to 5.9%, the lowest since July 2008. Job gains this year are poised for the best performance since 1999.
