The numbers: The productivity of American workers rose by a revised 5.2% annual rate in the third quarter, the government said Wednesday.
It is the fastest pace since the third quarter of 2020. Excluding the pandemic era, it’s the fastest since the fourth quarter of 2009.
The third-quarter gain in nonfarm productivity was originally put at a 4.7% rate in the preliminary report last month.
Over the past year, productivity has increased by a revised 2.4% following a 1.2% gain in the second quarter. These are the first two straight quarters of productivity growth since early 2021.
The economy grew at a solid 5.2% annual pace in the third quarter, faster than the initial estimate of a 4.9% rate of growth.
Key details: Output, or the amount of goods and services produced, was somewhat stronger than previously reported. The increase was raised to 6.1% from 5.9%.
Hours worked was revised down a tick to show a 0.9% annual rate of growth compared to the preliminary 1.1% increase.
Unit-labor costs dropped by a larger 1.2% annual pace in the third quarter, compared to the preliminary 0.8% decrease.
Over the past year, unit-labor costs have risen 1.5%, down from a 3.5% rate in the second quarter.
Compensation accelerated at a 3.9% clip in the third quarter while inflation-adjusted hourly compensation rose at a 0.3% rate.
Big picture: Some economists argue that we are in a new sustained surge in productivity growth. This would be good news for many reasons but the main one is it would help contain wages and bring down inflation without a sharp rise in unemployment. Other economists and Federal Reserve officials have said it is too soon to know for sure whether this recent uptrend in productivity is sustainable.
What are they saying? “When the results are all in, 2023’s advance for unit labor costs may be a little lower than 4% but still likely to be too high to be consistent with 2% inflation, said Stephen Stanley, chief U.S. economist at Santander.
Market reaction: Stocks
DJIA
SPX
opened higher on Wednesday while the 10-year Treasury yield
BX:TMUBMUSD10Y
was down slightly to 4.14% in morning trading.
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