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US workers' productivity jumps 3 per cent in third quarter

In this May 24, 2017, photo, Seaman Joseph Zyla gets a hair cut from Tyson Sullivan at the barber shop within the Exchange store at Offutt Air Force Base, Neb. On Thursday, Nov. 2, 2017, the Labor Department issues revised data on productivity in the third quarter. (AP Photo/Nati Harnik)
November 02, 2017 - 5:49 AM

WASHINGTON - U.S. workers' productivity jumped 3 per cent in the third quarter, the strongest gain in three years, while labour costs remained moderate.

The increase in productivity in the July-September quarter was double the 1.5 per cent gain in the second quarter, the Labor Department reported Thursday. Unit labour costs rose a modest 0.5 per cent in the third quarter, up only slightly from a 0.3 per cent gain in the second quarter.

The strong upturn in productivity, the amount of output per hour of work, is not expected to last. But economists are hopeful that future gains will be stronger than the anemic performance of recent years. Economists say increasing productivity is the biggest challenge facing the economy currently and without an improvement the Trump administration's goal of boosting economic growth will not be realized.

The stronger productivity increases in the past two quarters followed a scant 0.1 per cent gain in the first quarter this year. The improvement reflected the fact that overall output, as measured by the gross domestic product, accelerated sharply following a weak start to the year. GDP grew at an annual rate of 3 per cent in the third quarter, the government reported last week, and that followed a 3.1 per cent rise in the second quarter. It was the first back-to-back GDP gains of 3 per cent or better in three years.

Productivity actually declined in 2016, dropping 0.1 per cent. It was the first annual decline in 34 years and followed a string of weak annual performances since the economy emerged from the Great Recession in mid-2009.

Productivity has averaged annual gains of just 1.2 per cent from 2007 through 2016, a sharp slowdown from average annual gains of 2.6 per cent from 2000 to 20007, increases that reflected a boost from increased use of computers and the internet in the workplace.

Rising productivity means increased output for each hour of work, which allows employers to boost wages without triggering higher inflation.

The challenge of boosting productivity back to the levels before the 2007-2009 Great Recession will be a key factor determining whether President Donald Trump can achieve his goal of boosting overall growth from the modest average annual gains of 2.2 per cent seen during the current recovery, which is now in its ninth year.

During the campaign, Trump promised to double growth to 4 per cent or better. His budget forecasts a still ambitious increase to gains of 3 per cent per year as Trump's economic program of tax cuts, deregulation and tougher enforcement of trade laws takes effect.

Private economists say weak productivity and an aging workforce will make achievement of even 3 per cent annual GDP growth a real challenge.

News from © The Associated Press, 2017
The Associated Press

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