U.S. manufacturing productivity rose more than initially estimated in the third quarter, driven by a stronger showing in durable-goods output, a development that points to improved efficiency on factory floors.
Productivity in the durable-goods manufacturing sector increased at a 5.4 percent annual rate in the third quarter, revised up from a 4.7 percent gain in the preliminary estimate. Output in durables was revised higher to a 3.6 percent increase, while hours worked fell 1.7 percent.
For total manufacturing, productivity rose at a 3.7 percent annual rate, revised up from 3.3 percent. Manufacturing output was revised up to a 3.0 percent increase, while hours worked fell 0.7 percent.
The revised figures underscore a quarter in which manufacturers produced more with fewer labor hours, particularly in industries that make longer-lived goods such as machinery, vehicles and equipment.
Measures of labor-cost pressure in manufacturing eased slightly with the revisions. Unit labor costs in durable manufacturing were revised to no change from a 0.6 percent increase in the preliminary report, reflecting the stronger productivity gain. Unit labor costs for total manufacturing were revised down to a 1.1 percent increase from 1.5 percent.
Across the broader economy, the revision left the headline picture unchanged. Nonfarm business productivity rose at a 4.9 percent annual rate in the third quarter, the same as previously reported, as output increased 5.4 percent and hours worked rose 0.5 percent. Unit labor costs for the nonfarm business sector fell 1.9 percent, also unchanged.
The update also modestly strengthened the estimate for productivity in the nonfinancial corporate sector. Productivity there rose 3.3 percent, revised up from 3.0 percent, as output was revised higher to a 4.0 percent gain while hours worked were unchanged at a 0.7 percent increase. Unit labor costs in the nonfinancial corporate sector were revised down to a 0.3 percent increase from 0.6 percent.
Economists often describe productivity improvements as disinflationary. Improved productivity allows for a faster pace of economic growth and wage gains without pushing up prices.
“Ultimately, technology increases productivity, which is a basis for rising wages. And it may not all happen immediately, but over time, it’s what enables incomes to rise over time is rising productivity,” Fed chairman Jerome Powell said Wednesday.
The data are seasonally adjusted and expressed at annual rates. Productivity measures output per hour and unit labor costs reflect labor compensation relative to productivity.
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