US Productivity Unexpectedly Plunges For The First Time Since 2015 As Labor Costs Surge

US Productivity unexpectedly posted the first decline in almost four years and labor costs accelerated in Q3, suggesting a pickup in efficiency earlier this year was more of a temporary shift.

Nonfarm business employee output per hour decreased at a 0.3% annualized rate in the third quarter, well below the expected rise of 0.9% and the first decline since December 2015.

Source: Bloomberg

The report showed the decline in productivity resulted from a 2.1% increase in output against a 2.4% rise in hours worked.

Driving this decline was surging unit labor costs (+3.6%) following 2.4% in the prior period...

Source: Bloomberg

From a year earlier, productivity rose 1.4%, down from 1.8% in the prior period. Unit labor costs were up 3.1% year-over-year, which could be a sign that a tight job market is filtering through to what companies are spending on wages.

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