U.S. productivity growth expands strongly in Q3

Productivity in the U.S. grows solidly in the third quarter. The pace of growth picked up, further affirming that productivity is turning a corner after the 2016 doldrums. Nonfarm business output per hour was up 3 percent sequentially in the September quarter, after rising 1.5 percent and 0.1 percent in the second and first quarter, respectively. This is after a 3.8 percent rise in output that drove must of the improvement in productivity.

Employee hours decelerated to 0.8 percent, further aiding the revival in productivity. Compensation per hour was up 3.5 percent, and adjusted for inflation, real compensation rose 1.5 percent. Unit labor costs rose just 0.5 percent, a subdued performance for the second straight quarter, noted Barclays in a research report.

On a year-on-year basis, productivity growth was up 1.5 percent, rebounding considerably since 2016, when it was virtually zero. The recent rebound marks a rebound in what was otherwise a very weak trend for productivity growth in the U.S.

Meanwhile, unit labor costs dropped modestly by 0.1 percent year-on-year and in recent quarters have reversed the buoyant rise of recent years, possibly implying that the trends in unit labor costs and productivity are expected to converge in the quarters ahead, added Barclays.

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