Productivity gains in the U.S. posted the best back-to-back quarters since 2015, echoing a pickup in economic growth and offering some hope that faster expansion without stoking inflation is possible.
The main measure of non-farm business employee output per hour increased at a 2.2% annualized rate in the July-September period, a Labor Department report showed Thursday.
That compared with an estimated 2.1% rise in Bloomberg’s survey of economists and a revised 3% in the previous three months.
Unit labor costs rose at a 1.2% annualized rate, slightly above projections, following a 1% drop.
Tepid gains in productivity in recent years have puzzled economists, who are watching to see if Republican-backed tax cuts, a tightening labor market and new technologies can finally deliver a sustained pickup. For Federal Reserve policy makers, a persistent increase in efficiency would potentially limit the need for higher interest rates.
Compared with a year earlier, productivity rose 1.3%, the same pace as in the second quarter and equal to the average annual rate from 2007 to 2017. That’s well below the 3% pace of the late 1990s.
Elsewhere in the productivity report, inflation-adjusted hourly earnings rose at a 1.4% annualized pace after a 0.3% increase, while hours worked rose 1.8%. Output advanced at a 4.1% rate, following 5%.
Among manufacturers, productivity rose at a 0.5% pace after a 1.2% rate in the prior quarter. That compares with an annual average gain of 0.7% from 2007 to 2017.
