Nonfarm business sector labor productivity rose by 2.2 percent during the third quarter of 2018, according to new data from the Bureau of Labor Statistics. That was a slight slowdown from Q2’s upward-revised gain but still the best 2-quarter period for productivity growth since 2015. The third quarter’s rise in output per hour is an encouraging side-effect of companies using recent tax savings to increase capital spending and reinvest in their businesses.
Continued trade uncertainty, though, is already causing many firms to scale back their investment plans, which is an unneeded headwind for productivity growth just as it is showing signs of finally breaking out of a multi-year downtrend. Moreover, higher productivity will be crucial for sustaining the aging economic expansion in America because it can help limit inflation. Former Federal Reserve Chair Janet Yellen also described productivity growth as the “most important factor determining continued advances in living standards.”
Sources: Econoday, U.S. DoL, ZH, FRBSL
Post author: Charles Couch