Productivity in US posts best back-to-back quarters since 2015

By BLOOMBERG

WASHINGTON • Productivity gains in the US posted the best back-to-back quarters since 2015, echoing a pick-up in economic growth and offering some hope that faster expansion without stoking inflation is possible.

The main measure of non-farm business employee output per hour increased at a 2.2% annualised rate in the July-September period, a Labour Department report showed yesterday. That compared to an estimated 2.1% rise in Bloomberg’s survey of economists and a revised 3% in the previous three months.

Unit labour costs rose at a 1.2% annualised rate, slightly above projections, following a 1% drop.

Tepid gains in productivity in recent years have puzzled economists, who are watching to see if Republican-backed tax cuts, a tightening labour market and new technologies can finally deliver a sustained pickup.

For US Federal Reserve policymakers, a persistent increase in efficiency would potentially limit the need for higher interest rates.

Compared to a year earlier, productivity rose 1.3%, the same pace as in the second quarter and equal to the average annual rate from 2007 to 2017. That’s well below the 3% pace of the late 1990s.

A separate report yesterday showed the labour market remains tight. Filings for unemployment benefits fell by 2,000 last week to 214,000, near the lowest level since 1969, according to Labour Department figures.

The number of Americans on jobless- benefit rolls dropped during the prior week to 1.63 million, the lowest since 1973. Inflation-adjusted hourly earnings, meanwhile, rose at a 1.4% annualised pace after a 0.3% increase.