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Economy in Brief

U.S. Productivity Growth Little Revised for 3Q
by Tom Moeller December 7, 2004

Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth.

Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from 2.1% but output growth also was revised up to 4.2% (4.7% y/y), the same as in 2Q.

Unit labor costs grew 1.8% as compensation growth was left unchanged at 3.6% (4.0% y/y).

Productivity in the manufacturing sector was revised up to 4.6% (4.7% y/y) from 4.3%. Unit labor cost growth in the factory sector was revised down slightly to no change (-1.5% y/y).

In the nonfinancial corporate sector productivity growth accelerated to 4.2% (3.1% y/y) from 3.3% in 2Q. This is the first release of figures for 3Q. Output, a figure derived from the income side of the National Income & Product Accounts, grew at a 5.6% (4.8% y/y) rate versus 4.2% growth in 2Q. Hours worked grew at a 1.3% rate (1.7% y/y).

During the last ten years there has been an 86% (inverse) correlation between y/y growth in unit labor costs in the nonfinancial corporate sector and profit growth.

From The Federal Reserve Bank of Chicago is this paper titled "The acceleration in U.S. total factor productivity after 1995: The role of information technology."

Non-farm Business Sector (SAAR) 3Q '04 (Revised) 3Q '04 (Prelim.) 2Q '04 Y/Y 2003 2002 2001
Output per Hour 1.8% 1.9% 3.9% 3.1% 4.4% 4.4% 2.5%
Compensation 3.6% 3.6% 5.9% 4.0% 4.1% 3.3% 4.0%
Unit Labor Costs 1.8% 1.6% 1.9% 0.8% -0.4% -1.1% 1.5%
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