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Economic Report: U.S. productivity in the third quarter raised to 0.8%

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The numbers: The productivity of American workers rose by a revised 0.8% annual rate in the third quarter, the government said Wednesday after updating its initial report.

The increase was originally put at 0.3%.

Key details: Output, or the amount of goods and services produced, was somewhat stronger than previously reported. The increase was raised to 3.3% from 2.8%.

Hours worked was revised up a tick to show a 2.5% annual rate of growth.

Unit-labor costs climbed by a smaller 2.4% annual pace in the third quarter, compared to the preliminary 3.5% increase.

Over the past year unit-labor costs have risen a sharp 5.3%, reflecting a tight labor market in which companies have had to pay higher wages to attract and retain employees.

Yet because of high inflation, workers aren’t really benefiting from more pay. Inflation-adjusted hourly compensation fell at a 2.3% rate in the third quarter.

Big picture: Productivity has been weak for years and the pandemic didn’t help.

That’s a bad thing for the economy. Rising productivity tends to result in higher business profits, rising wages and a better standard of living.

Slower productivity growth constrains the economy and limits growth.

Economists don’t expect productivity to improve much in the next few years.

Market reaction: Limited. The Dow Jones Industrial Average
DJIA,
+0.00%

and S&P 500
SPX,
+0.02%

were set to open lower in Wednesday trades.

Key Words: Cathie Wood says the better historical parallel for the current high inflation environment is World War I, not the 1970s

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