US Q3 productivity up 2.2% vs 2.2% increase expected

Q3 productivity up 2.2 percent

U.S. nonfarm productivity grew at a faster pace than previously thought in the third quarter, but the underlying trend remained very weak.

The Labor Department said on Wednesday that productivity, which measures hourly output per worker, increased at a 2.2 percent annual rate and not the 1.6 percent pace it had reported last month.

Productivity expanded at a 3.5 percent rate in the second quarter.

The revision to third-quarter productivity was in line with economists' expectations and reflected upward adjustments to the third-quarter gross domestic product estimate published last week. The economy grew at a 2.1 percent rate in the July-September period.

Productivity increased only 0.6 percent compared to the third quarter of 2014, underscoring the weakness in the trend. While that was marginally up from the 0.4 percent reported in November, it was the slowest rise in nearly a year.

Economists blame softer productivity on lack of investment, which they say has led to an unprecedented decline in capital intensity. While weak productivity has boosted employment growth as companies hired more workers to increase output, economists say it has contributed to stagnant wages and lowered the economy's speed limit.

Economists say persistently tepid productivity could continue to limit wage growth even as the labor market approaches full employment.

An employee secures customers' orders with bubble wrap before they are shipped at the Amazon Fulfillment Center in Tracy, Calif.
Private payrolls up 217K in November vs 190K est: ADP

In the third quarter, hours worked fell at a 0.3 percent rate, rather than the 0.5 percent decline reported in November. It was still the first drop since the third quarter of 2009 and reflected a decline in self-employment.

Unit labor costs, the price of labor per single unit of output, increased at a 1.8 percent rate in the third quarter, instead of the previously reported 1.4 percent pace. Unit labor costs rose a a 2.0 percent rate in the second quarter.

They were up 3.0 percent compared to the third quarter of 2014. Compensation per hour rose at a 4.0 percent rate in the third quarter, revised up from the 3.0 percent pace reported last month. Compensation was up 3.6 percent compared to the third quarter of 2014.

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