U.S. worker productivity grew at the fastest pace in three years in the third quarter, pushing down labor costs.
Nonfarm productivity, which measures hourly output per worker, rose at an annualized rate of 4.7% last quarter, the fastest since the third quarter of 2020, the Labor Department reported Thursday.
The second quarter data was revised slightly upward to show that productivity grew at a rate of 3.6% instead of the previously reported 3.5% pace.
Economists polled by Reuters had predicted a 4.1% increase. The rebound was signaled by a report last week that showed the economy grew at its fastest pace in nearly two years in the third quarter.
Productivity grew at a rate of 2.2% compared to the same period last year.
The Government reviewed data from several years ago. Productivity growth in the second quarter of 2020 was revised upward by 3.4 percentage points to a rate of 20.7%, making it the fastest since the government began tracking productivity. 1947 series.
Productivity grew at an average annual rate of 1.2% from the fourth quarter of 2019 to the second quarter of 2023, a downward change of 0.1 percentage point. The productivity growth rate for this economic cycle through the third quarter was 1.4%.
Still, Fed officials are likely to welcome a succession of strong productivity gains. The entity kept interest rates steady on Wednesday, but left the door open to a new increase in borrowing costs, in a nod to economic stability.
As of March 2022, the Fed has raised its policy rate by 525 basis points to the current range of 5.25%-5.50%.
Unit labor costs – the price of labor per unit of output – fell at a rate of 0.8% in the third quarter. Last quarter they grew 3.2%. Unit labor costs increased 1.9% from last year. The moderate annual increase is a step in the right direction to reduce inflation to the 2% goal established by the Fed.
Hourly compensation rose at a rate of 3.9% last quarter, after accelerating 6.9% in the April-June period. A year ago it was up 4.2%.