U.S. nonfarm productivity growth decelerates in Q3 2018

Productivity growth momentum in the U.S. decelerates a bit in the third quarter of 2018. Nonfarm output per hour in the third quarter came in at 2.2 percent sequentially, a slowdown from an upwardly revised 3 percent in the second quarter.

The estimate was widely consistent with consensus expectations of 2.1 percent. After slowing considerably in the first quarter of this year and the last quarter of 2017, productivity growth picked up again recently as output growth rebounded and employee hours growth has levelled off. Output growth came in at 4.1 percent, whereas employee hours were up 1.8 percent.

Compensation per hour was up 3.5 percent, whereas adjusted for inflation rose 1.4 percent. Unit labor costs were up 1.2 percent, after having dropped 1 percent in the prior quarter.

On a year-on-year basis, productivity growth remained same at 1.3 percent, about where it has been on average for most of the rebound. Unit labor costs were up 1.5 percent year-on-year, and compensation per hour rose 2.8 percent year-on-year, both slowing compared with the initial half of 2018. More broadly, the trend in productivity growth since 2014 continues to be weak compared with its historical trajectory, noted Barclays in a research report.

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