US productivity drops by most since Q4 2015

[WASHINGTON] American workers were unexpectedly less productive during the third quarter, with growth in their output failing to keep up with hours worked.

The Labour Department said on Wednesday nonfarm productivity, which measures hourly output per worker, fell at a 0.3 per cent annualised rate between July and September, the biggest decline in almost four years. The last drop that was sharper was in the fourth quarter of 2015.

The decline might set back the prospects of a pick-up expected by some economists in the trend growth rate for productivity following 2017 tax law changes partially aimed at fostering investment.

Analysts had expected productivity growth of 0.9 per cent during the quarter.

Part of the surprise owes to a modest upward revision in the Labour Department's estimate for productivity growth during the second quarter, to 2.5 per cent growth from a previous estimate of 2.3 per cent.

With the revisions, labour productivity was 1.4 per cent higher in the third quarter than in the same period of 2018. That is a tenth of a point higher than the 1.3 per cent average annual growth rate of 2007-2018, but well below the 2.1 per cent long-run average between 1947 and 2018.

Labour productivity also declined in the factory sector for the second straight quarter, falling at a 0.1 per cent annual rate in the third quarter.

Unit labour costs, the price of labor per single unit of output, rose at a 3.6 per cent rate in the third quarter.

Hours worked rose at a 2.4 per cent rate, while output was up 2.1 per cent.

REUTERS