U.S. Productivity Gains Slow Despite Record Economic Growth

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U.S. productivity gains cooled in the third quarter despite the record pace of economic growth, as a surge in output was accompanied by a huge increase in hours worked.

Nonfarm business employee output per hour increased at a 4.9% annualized rate from July through September, according to Labor Department data released Thursday. The third-quarter figure --following a revised 10.6% gain in the second quarter which was the fastest since 1971 -- compared with a median estimate in a Bloomberg survey of economists for a 5.6% increase.

Unit labor costs fell 8.9%, the biggest drop since 2009, compared with a forecast for an 11% drop.

The wide swings in productivity this year -- stemming from the pandemic-induced recession and subsequent rebound -- aren’t necessarily indicative of any longer-term trend after an expansion marked by efficiency gains that were slower than prior decades. It may take several more quarters before any fresh trajectory is apparent, especially as businesses and employees adjust to new ways of working.

The figures follow last week’s report showing gross domestic product grew at a record 33.1% annualized pace in the July-September period, reflecting business reopenings and a resilient consumer.

Thursday’s report showed output advanced at a 43.5% pace while hours worked rose 36.8%. Meanwhile, hourly compensation fell at a 4.4% annual pace during the quarter after a 20% increase.

©2020 Bloomberg L.P.

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