Productivity fastest in two years, labor costs subdued

WASHINGTON Wed Dec 5, 2012 8:37am EST

A Ford Motor production worker assembles batteries for Ford electric and hybrid vehicles at the Ford Rawsonville Assembly Plant in Ypsilanti Twsp, Michigan November 7, 2012. REUTERS/Rebecca Cook

A Ford Motor production worker assembles batteries for Ford electric and hybrid vehicles at the Ford Rawsonville Assembly Plant in Ypsilanti Twsp, Michigan November 7, 2012.

Credit: Reuters/Rebecca Cook

WASHINGTON (Reuters) - Nonfarm productivity increased at a much faster clip than initially thought in the third quarter as businesses held the line on hiring even as output surged, with unit labor costs falling at their fastest pace in almost a year.

Productivity increased at a 2.9 percent annual rate, the fastest since the third quarter of 2010, the Labor Department said on Wednesday.

It had previously estimated that productivity, which measures hourly output per worker, rose at a 1.9 percent pace in the third quarter. In the second quarter, productivity had increased at a 1.9 percent rate.

Economists polled by Reuters had forecast productivity being revised up to a 2.7 percent pace in the third quarter.

The upward revision to productivity growth reflected an upward adjustment to the estimate for third-quarter economic growth to a 2.7 percent pace from 2.0 percent.

But most of the pick-up in GDP growth was because of a build-up in inventories as consumer spending slackened.

Businesses emerged from the 2007-09 recession lean and are showing little urgency to ramp up hiring, relying on their existing workers to meet production and keeping a tight hand on costs such as wages.

Unit labor costs -- a gauge of the labor-related cost for any given unit of output -- fell at 1.9 percent rate in the third quarter, far more than the 0.1 percent drop previously reported.

They fell for a second straight quarter and were up only 0.1 percent from a year-ago, underscoring the lack of wage-related inflation pressures in the economy and helping to keep the door open to further monetary easing by the Federal Reserve to stimulate the economy.

Worker hours rose at a 1.3 percent rate in the third quarter, while nonfarm output surged at a 4.2 percent pace -- the fastest since the fourth quarter of 2011.

Output had previously been reported to have increased at a 3.2 percent pace.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Comments (4)
Uhhh, unless productivity can buy cars and groceries, we are in for a depression. But, of course, the machines won’t feel it.

Dec 05, 2012 9:25am EST  --  Report as abuse
acman2k11 wrote:
Being that most people are scared to death of losing there job and working faster and that there are less people working and that those that are working are working at a pay level that is low it makes since.

Dec 05, 2012 9:44am EST  --  Report as abuse
texas100 wrote:
Productivity growth is great for companies, not so good for labor.. Companies will not hire until consumer spending increases consistently, and consumers are waiting for the trip over the fiscal cliff.. Catch 22…

Dec 05, 2012 9:59am EST  --  Report as abuse
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