U.S. Labor Productivity Surges In Q3, Labor Costs Unexpectedly Turn Lower
A report released by the Labor Department on Thursday showed U.S. labor productivity shot up by more than expected in the third quarter of 2023, while the report also showed an unexpected downturn in unit labor costs during the quarter.
The Labor Department said labor productivity soared by 4.7 percent in the third quarter after surging by a revised 3.6 percent in the second quarter.
Economists had expected productivity to spike by 4.2 percent compared to the 3.5 percent jump that had been reported for the previous quarter.
The stronger than expected labor productivity growth, a measure of output per hour, came as output skyrocketed by 5.9 percent and hours worked increased by 1.1 percent.
Meanwhile, the report said unit labor costs fell by 0.8 percent in the third quarter after shooting up by a revised 3.2 percent in the second quarter.
Unit labor costs were expected to climb by 0.7 percent compared to the 2.2 percent jump that had been reported for the previous quarter.
The unexpected pullback by unit labor costs came as the spike in productivity more than offset a 3.9 surge in hourly compensation.
Real hourly compensation, which takes changes in consumer prices into account, rose by 0.3 percent in the third quarter after soaring by 4.1 percent in the second quarter.
“The renewed surge in productivity growth and decline in unit labor costs is making the Fed’s job easier,” said Michael Pearce, Lead U.S. Economist at Oxford Economics.
He added, “While the data are particularly volatile, higher productivity growth is helping to support the supply side of the economy, which is one reason why inflation remains on a downward trend even as economic growth is resilient.”
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