The Labor Department released a report on Tuesday confirming that the surge in U.S. labor productivity during the third quarter remains unchanged from the earlier estimate. However, there was a downward revision for the rise in U.S. unit labor costs.
According to the report, labor productivity increased by 2.2% in the third quarter, remaining consistent with the preliminary estimate and aligning with economists' expectations. This marked increase reflects a slight acceleration from the 2.1% growth observed in the second quarter. The notable rise in productivity, which measures output per hour, occurred as output jumped by 3.5%, while the hours worked only grew by 1.2%.
Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics, noted, "Productivity growth, which has exceeded the business cycle average over the past year, might decelerate in response to more relaxed labor market conditions, yet we anticipate it will maintain a robust pace."
In contrast, the Labor Department reported a downward revision for unit labor costs in the third quarter, now showing an increase of 0.8%, in comparison to the initially reported 1.9% rise. Economists had predicted no revision in the growth rate of unit labor costs.
The revision indicates that unit labor costs increased less than initially projected, owing to a downward adjustment of the spike in hourly compensation to 3.1% from 4.2%. Additionally, the rise in real hourly compensation, which adjusts for changes in consumer prices, was revised down to 1.8% from 3.0%.
Vanden Houten remarked, "Revisions to lower unit labor costs support our view - shared by the Federal Reserve - that the labor market and wage growth are diminishing as sources of inflationary pressures." Revised figures also indicate that unit labor costs fell by 1.1% in the second quarter, contrasting with the previously reported 2.4% increase.
