Americans More Productive Than Ever Despite Falling Costs
American labor productivity increased more than expected in the third quarter, according to a revised estimate released by the Bureau of Labor Statistics on Monday. Third-quarter output was revised from +3.7 percent to +4.7 percent while hours worked remained unchanged at +1.7 percent, pushing total non-farm business sector labor productivity up to +3 percent for the quarter.
Labor productivity is a highly watched but sometimes nebulous economic indicator. While labor conditions are sensitive to short-term cyclical trends, productivity gains are essential for long-term economic growth. Increases in productivity contribute to real value creation in the economy and can lead to higher wages and economic growth without contributing to inflation. Output and hours worked — the components of the productivity calculation — have historically been subject to cyclical mood swings.
Third-quarter data follow a second-quarter productivity increase of just 0.9 percent and a first-quarter decline of 1.7 percent. Since the BLS makes calculations off previously released gross domestic product and labor market data, economists anticipated a jump in productivity following the relatively strong third-quarter GDP report.