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Labor Productivity Declines

Nonfarm business sector labor productivity decreased 0.3 percent in the third quarter of 2019, the…

  • December 6, 2019

Nonfarm business sector labor productivity decreased 0.3 percent in the third quarter of 2019, the U.S. Bureau of Labor Statistics reports.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.

In Q3, output increased 2.1 percent and hours worked increased 2.4 percent.

The Kicker: Labor Costs Rise Fast

Unit labor costs in the nonfarm business sector increased by a big 3.6 percent in the third quarter of 2019, reflecting a 3.3-percent increase in compensation per hour and a 0.3-percent decline in productivity.

Unit labor costs increased 3.1 percent over the last four quarters.

From the third quarter of 2018 to the third quarter of 2019, productivity increased 1.4 percent, reflecting a 2.3-percent increase in output and a 0.9-percent increase in hours worked.

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.

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