Productivity Outpaces Labor Costs in Q3 2016

By Jon C. Ogg Updated Jan 12, 5:05PM EST · Published Dec 6, 9:15AM EST

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Productivity Outpaces Labor Costs in Q3 2016 — © Thinkstock

Is it possible that the endless decline and stagnation in worker productivity is ending? The Bureau of Labor Statistics (BLS) reported on Tuesday that the nonfarm productivity rose by 3.1% in the third quarter of 2016. That was actually a tad less than the 3.3% expected by Bloomberg, but it is flat with the second quarter of 2016.

According to the BLS release, the quarterly increase in nonfarm business sector labor productivity was the first after three consecutive declines. From the third quarter of 2015 to the third quarter of 2016, productivity was unchanged.

The BLS also reported that unit labor costs were up by 0.7% in the third quarter of 2016. That cost basis is more than twice the gain of the 0.3% consensus economist target from Bloomberg and from the 0.3% gain in the second quarter of 2016.

As a reminder, labor productivity (output per hour) is measured by dividing an index of real output by an index of hours worked by all participants.

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More data was shown as follows:

Manufacturing sector labor productivity increased 0.4 percent in the third quarter of 2016.

Output and hours worked increased 0.6 percent and 0.3 percent, respectively.

Output per hour increased 3.0 percent in the durable goods manufacturing sector and decreased 3.0 percent in the nondurable goods sector.

Over the last four quarters, manufacturing sector productivity was unchanged, as output and hours worked both declined 0.1 percent.

Unit labor costs in manufacturing increased 3.3 percent in the third quarter of 2016 and rose 3.6 percent from the same quarter a year ago.

Hourly compensation increased 3.7 percent in the third quarter of 2016.

The BLS further said:

Preliminary third-quarter 2016 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity increased 7.1 percent in the third quarter of 2016–the largest gain since an 8.8-percent gain in the first quarter of 2010–as output increased 8.3 percent and hours worked increased 1.1 percent. Over the last four quarters, productivity increased 1.6 percent. Unit labor costs decreased 2.7 percent in the third quarter of 2016 and increased 0.9 percent over the last four quarters.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.