Pro­duc­tiv­ity up at 3.1 per­cent rate in 3rd quar­ter

Daily Local News (West Chester, PA) - - BUSINESS - By Martin Crutsinger

The pro­duc­tiv­ity of Amer­i­can work­ers rose in the July-Septem­ber quar­ter at the fastest pace in two years, while la­bor costs slowed.

Pro­duc­tiv­ity in­creased at a 3.1 per­cent rate in the third quar­ter, the La­bor De­part­ment re­ported Thurs­day. It was a sig­nif­i­cant im­prove­ment from the pre­vi­ous three quar­ters when pro­duc­tiv­ity had fallen. Unit la­bor costs edged up a mod­est 0.3 per­cent in the third quar­ter, com­pared to a 3.9 per­cent jump in the sec­ond quar­ter.

The pro­duc­tiv­ity fig­ure was the best show­ing since a 4.2 per­cent gain in the third quar­ter of 2014. But the re­bound was ex­pected to be tem­po­rary. Strong gains in pro­duc­tiv­ity are needed to boost Amer­i­cans’ liv­ing stan­dards.

Economists fore­cast that pro­duc­tiv­ity will quickly fall back to the tepid gains seen since the 2007-2009 re­ces­sion.

“Fol­low­ing the burst of faster pro­duc­tiv­ity growth dur­ing the late 1990s, which is usu­ally at­trib­uted to the in­cor­po­ra­tion of desk­top PCs into the work­place and the in­ter­net, pro­duc­tiv­ity growth has slowed again in most de­vel­oped coun­tries,” said Paul Ash­worth, chief U.S. econ­o­mist at Cap­i­tal Eco­nom­ics. “The longer this slow­down goes on for, the less con­fi­dent we are of another tech­nol­ogy-re­lated ac­cel­er­a­tion.”

The lat­est pro­duc­tiv­ity gains had been ex­pected, given that over­all eco­nomic growth re­bounded in the third quar­ter af­ter ane­mic gains in the first half of the year. The gross do­mes­tic prod­uct, the na­tion’s to­tal out­put of goods and ser­vices, in­creased at a 2.9 per­cent rate in the third quar­ter, more than dou­ble the pace in the sec­ond quar­ter.

Pro­duc­tiv­ity rep­re­sents the amount of out­put per hour of work. Non­farm busi­nesses boosted out­put by 3.4 per­cent in the third quar­ter, while the hours worked rose a much more mod­est 0.3 per­cent.

Pro­duc­tiv­ity growth has been weak since the Great Re­ces­sion. It has av­er­aged an­nual gains of just 1.3 per­cent from 2007 through 2015, sharply lower than the 4.7 per­cent av­er­age an­nual pro­duc­tiv­ity gains from 2000 to 2007.

Fed­eral Re­serve Chair Janet Yellen has pointed to the slow­down in pro­duc­tiv­ity growth as a key chal­lenge fac­ing the coun­try.

Economists be­lieve that busi­nesses need to start fo­cus­ing more on rais­ing the ef­fi­ciency of their ex­ist­ing work­force rather than just hir­ing more work­ers to meet de­mand. They ex­pect com­pa­nies to put more em­pha­sis on in­creas­ing pro­duc­tiv­ity as the la­bor mar­ket hits full em­ploy­ment and the pool of available qual­i­fied work­ers di­min­ishes.

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