Labor Department Revises Productivity Upward For Third Quarter

Date: December 03, 2015

Productivity Rose At 2.2% During Q3, Up From Previous Estimate Of 1.6%

The Labor Department this week announced that productivity grew at an upwardly revised rate of 2.2 percent in the third quarter of 2015. The previously-announced rate of growth was 1.6%. Looking at individual components of productivity, the revisions show that output rose 1.8 percent during Q3 while hours worked fell by 0.3 percent. The fall in number of hours worked was the first decline in this data point since a 4.8 percent drop during Q3 2009. Additionally, the Labor Department reported that from Q3 2014 to Q3 2015 productivity rose 0.6 percent, with output rising 2.5 percent and hours worked rising 1.9 percent. Reuters reported that unit labor costs were revised upwards from 1.4 percent to 1.8 percent. MarketWatch reported that labor cost growth “appears to be accelerating, perhaps a sign a tightening labor market is forcing companies to pay more to attract or retain employees.” The year-over-year “increase in labor costs climbed to a 3% rate, the highest level in six quarters.” Increases in unit labor costs may prompt companies to invest in new equipment to increase productivity. The AP reported that productivity “grew at a faster rate than first thought, though it still lagged the pace set in the spring. Labor costs were also revised up, but the modest upward pace does not raise concerns about inflation.” Some economists “believe the recent slowdown reflects a temporary drop in business investment in new equipment, and they forecast a rebound in productivity growth to higher levels over the next few years.”

What This Means For Small Businesses

Despite the upward revision in Q3 productivity, recent data hasn’t been especially encouraging for the overall US economic picture. As NFIB chief economist William Dunkelberg said in the latest Economic Trends report, “GDP growth languished in Q3, and will not likely impress in Q4. The industrial sector is weakening and the small business sector has not returned to its historical role in the production of GDP and jobs.” The economy has a long way to go to recover and grow following the recession.

Additional Reading

The Wall Street Journal also covered the latest productivity data.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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