Updated data show factories produced more with fewer labor hours in the third quarter, easing labor-cost pressures and reinforcing signs of improved efficiency.
By yourNEWS Media Newsroom
U.S. manufacturing productivity rose more than previously estimated in the third quarter, reflecting stronger output in durable goods and fewer hours worked, according to revised government data. The updated figures point to a period of improved efficiency on factory floors, particularly among producers of longer-lived goods such as machinery, vehicles and industrial equipment.
Productivity in the durable-goods manufacturing sector increased at a 5.4 percent annual rate during the quarter, revised up from an initial estimate of 4.7 percent. Output in durable goods was revised higher to a 3.6 percent increase, while hours worked were revised lower, falling 1.7 percent.
For total manufacturing, productivity rose at a 3.7 percent annual rate, up from a previously reported 3.3 percent. Manufacturing output was revised to a 3.0 percent gain, while hours worked declined 0.7 percent.
The revisions highlight a quarter in which manufacturers were able to expand production while using less labor, a combination that tends to improve profit margins and reduce cost pressures. That dynamic was reflected in updated measures of labor costs. Unit labor costs in durable-goods manufacturing were revised to show no change, compared with a previously reported 0.6 percent increase. For total manufacturing, unit labor costs were revised down to a 1.1 percent increase from an earlier estimate of 1.5 percent.
Across the broader economy, the revisions left the overall productivity picture unchanged. Nonfarm business productivity rose at a 4.9 percent annual rate in the third quarter, as previously reported, with output increasing 5.4 percent and hours worked rising 0.5 percent. Unit labor costs for the nonfarm business sector fell 1.9 percent, unchanged from the initial estimate.
The update also modestly strengthened productivity figures for the nonfinancial corporate sector. Productivity there rose at a 3.3 percent annual rate, revised up from 3.0 percent. Output was revised higher to a 4.0 percent gain, while hours worked were unchanged at a 0.7 percent increase. Unit labor costs in the nonfinancial corporate sector were revised down to a 0.3 percent increase from 0.6 percent.
Economists often view productivity gains as disinflationary because they allow businesses to grow and raise wages without increasing prices. Federal Reserve Chairman Jerome Powell highlighted that relationship Wednesday, saying, “Ultimately, technology increases productivity, which is a basis for rising wages. And it may not all happen immediately, but over time, it’s what enables incomes to rise over time is rising productivity.”
The figures are seasonally adjusted and reported at annual rates. Productivity measures output per hour worked, while unit labor costs reflect the cost of labor compensation relative to productivity.
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