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Economy in Brief

U.S. Productivity Growth Slowed From Strengthened 2Q Pace
by Tom Moeller November 4, 2004

In 3Q04, non-farm labor productivity growth slowed to 1.9% but growth in 2Q was revised up to 3.9% from 2.5% estimated earlier. Consensus expectations had been for 2.0% growth in 3Q.

The slowdown reflected improvement in the labor market where growth in hours worked by all persons (employment times hours) accelerated to 2.1% (1.5% y/y) from 0.3% in 2Q. Output grew at a 4.1% rate (4.7% y/y), roughly the same as in 2Q.

Unit labor cost growth accelerated to 1.6% from 1.0% in 2Q due to the productivity slowdown even though compensation also slowed to 3.6% (3.7% y/y) from 4.9%.

Productivity in the manufacturing sector slipped sharply to 4.3% (4.6% y/y) from 8.3% in 2Q which was pegged earlier at 6.9%. Unit labor costs in the factory sector grew 0.1% (-2.1% y/y), the first quarterly increase this year.

Non-farm Business Sector (SAAR) 3Q '04 2Q '04 (Revised) Y/Y 2003 2002 2001
Output per Hour 1.9% 3.9% 3.1% 4.4% 4.4% 2.5%
Compensation 3.6% 4.9% 3.7% 4.1% 3.3% 4.0%
Unit Labor Costs 1.6% 1.0% 0.6% -0.4% -1.1% 1.5%
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