US Worker Productivity Barely Rises, Though Helps Cool Labor Costs

US worker productivity barely increased in the third quarter after steep declines in the first half of the year, though enough to slow the pace of labor cost growth.

Productivity, or nonfarm business employee output per hour, increased at a 0.3% annual rate in the third quarter, according to Labor Department figures Thursday. That compared to a 4.1% decline in the second quarter and the 0.5% projected advance in a Bloomberg survey of economists.

Unit labor costs, or the amount a business pays to produce one unit of output, climbed at a 3.5% rate after surging 8.9% in the second quarter. The deceleration reflected the slight improvement in productivity and an easing in hourly compensation growth. Compared to the same quarter last year however, labor costs were up a robust 6.1%.

Firms often adopt new technologies or invest in equipment to make their workers more productive and help offset the inflationary impact of wage increases. Though the productivity figures can be extremely volatile, and have been especially so in the pandemic and subsequent recovery, the data do suggest some slowing. Compared to a year ago, productivity was down 1.4%.