US worker productivity rises moderately in third quarter; labor costs elevated

U.S. worker productivity increased moderately in the third quarter, resulting in only a gradual slowdown in labor costs that could cast a cloud over the inflation outlook.

Nonfarm productivity, which measures hourly output per worker, increased at a 2.2% annualized rate last quarter, the Labor Department's Bureau of Labor Statistics said on Thursday.

Data for the second quarter was revised lower to show productivity rising at a 2.1% pace instead of the previously reported 2.5% rate. Economists polled by Reuters had forecast productivity advancing at a 2.3% rate.

Productivity increased at a 2.0% pace from a year ago. The moderate pace of productivity does not bode well for the inflation and interest rate outlook.

Unit labor costs - the price of labor per single unit of output - rose at a 1.9% rate in the July-September quarter. That followed a 2.4% pace of expansion in the second quarter. Labor costs increased at a 3.4% rate from a year ago.

The Federal Reserve is later on Thursday expected to cut interest rates again, this time by a quarter of a percentage point to the 4.50%-4.75% range.

The U.S. central bank launched its policy easing cycle with an unusually large half-percentage-point rate cut in September, the first reduction in borrowing costs since 2020. The Fed hiked rates by 525 basis points in 2022 and 2023.

Compensation rose at a 4.2% rate last quarter after increasing at a 4.6% pace in the second quarter. It advanced at a 5.5% rate from a year ago. 

Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.