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U.S. productivity surges in third quarter

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U.S. productivity grew by 4.9% in the third quarter, marking the biggest increase in two years, the Bureau of Labor Statistics reported on Thursday. The strong gains were accompanied by an upward revision for the second quarter to 4.1%.

That’s an average of 4.5% over the past six months and is unmitigated good news. Unit labor costs declined by 1.9%, which is also encouraging.

Let’s see if the strong increase in nonfarm productivity, which measures hourly output per worker, translates to improvement in total factor productivity, which measures how efficiently businesses use their labor and capital, like investments in artificial intelligence.

If it does, then that increases the degrees of freedom at the Federal Reserve on rate cuts and points to an improvement in American living standards.

Yes, this estimate will need to survive coming benchmark data revisions to hiring and growth data but for now this is something to celebrate.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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