AP News

Ahead of the Bell: US Productivity

WASHINGTON (AP) — U.S. worker productivity growth likely slowed from July through September, a trend that could signal employers need to step up hiring.

Economists expect productivity increased at an annual rate of 1.3 percent in the third quarter, according to a survey by FactSet. That would be down from a 2.2 percent rate in the April-June quarter.

Labor costs are expected to have risen at annual rate of 1.2 percent, slightly slower than the 1.5 percent rate in the spring.

The Labor Department reports on worker productivity and labor costs at 8:30 a.m. EST Thursday.

Productivity is the amount of output per hour of work. Economists predict productivity will slow from the spring pace for the rest of this year and through 2013.

Weaker productivity can be a hopeful sign for job creation. It often means companies can't squeeze much more output from their staffs and must hire to meet demand.

The economy is showing some signs of improvement since the spring.

The economy grew at an annual rate of 2 percent in the July-September quarter, up from 1.3 percent growth in the April-June quarter. Consumers and the federal government spent more, and the housing market contributed to growth for the sixth straight quarter.

The unemployment rate dropped in September to 7.8 percent, the first time the rate has been below 8 percent since January 2009 — President Barack Obama's first month in office.

The government will release the October employment report on Friday. Economists forecast that the economy added 121,000 jobs last month, while the unemployment rate inched up to 7.9 percent.

The Federal Reserve closely follows changes in productivity and labor costs to monitor inflation pressures. With unemployment remaining elevated, economists do not expect wages to accelerate any time soon. Higher wages can lead to unwanted inflation.

Over the past year, productivity has risen 1.2 percent. That is far below the 3 percent average productivity growth turned in during 2009 and 2010. Those gains were a result of massive job layoffs during the recession as companies slashed costs in the face of falling demand.

Economists said higher productivity is typical during and after a recession. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.

The Good Business Issue
blog comments powered by Disqus