Final Q3 Non-Farm Productivity Up 3.0%; Labor Costs Drop 1.4%

WASHINGTON — The U.S. Q3 productivity revisions were about as expected, with few implications for the economic outlook.

Nonfarm productivity posted a 3.0% gain in Q3, up from a 1.9% rise in the original estimate. Unit labor costs were down 1.4%, versus a 0.6% drop in the original estimate.

Real GDP was revised 0.8 point higher in Q3, so it is no surprise that there was more output (now a 4.7% rise) in the source data to spread over hours worked (now a 1.7% increase). This boosted productivity.

In turn, the combination of more output with little change in compensation measures lowered unit labor costs. Hourly compensation was up 1.6% after revisions that totaled a lesser 0.3 point.

Manufacturing, a key sector because it shows cyclical behavior, had productivity off 0.3% and ULC up 1.3%. This was an unfavorable combination for Q3 that implies corporate profits temporarily were pressured.

Over the year, productivity is up just 0.3%, illustrating that far into an expansion this metric slows. Unit Labor Costs were up 2.1% over the year.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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