U.S. productivity increased in3Q
Reflecting the impact of COVID-19, the data was ‘especially volatile.’
U.S. productivity WASHINGTON— increased at a solid 4.6% pace in theJuly-Septemberquarter, slightly below the initial estimate, while labor costs fell at a slower pace.
The third quarter increase in productivity was below the first estimate a month ago of a 4.9% increase, the Labor Department reported Tuesday. Productivity had surged at a 10.6% rate in the second quarter.
Labor costs fell at a 6.6% rate in the third quarter, a smaller drop than the 8.9% decline estimated a month ago.
Productivity, the amount of output per hour of work, is the major factor determining living standards. As productivity rises, employers can pay theirworkers more without having to boost the price of their products.
The revisions reflected the fact that there was a 0.1 percentage-point downward revision in output and a0.3 percentage-point upwardrevision to hoursworked.
Economists cautioned that the swings in productivity this year have been unusually large and are distorting the underlying trend in productivity.
“The data have been especially volatile quarter-to-quarter reflecting the impact ofCOVID-19 onoutput, hours and compensation,” said Rubeela Farooqi, chief U.S. economist at High FrequencyEconomics. “The underlying trend in productivity will likely moderate from the current pace over coming quarters.”
The big increase in productivity inthe secondquarter occurred because employers were laying off millions of workers and the decline in people working was greater than the drop in production that occurred in the spring.