Washington, DC, December 6, 2005--Productivity rose at a 4.7% annual rate in the third quarter, to the fastest rate in two years, according to the Labor Department.
A month ago the preliminary production was reported to have risen at a 4.1% pace.
Unit labor costs - a gauge of wage-push inflationary pressures - fell at 1% annual pace in the quarter, revised down from a 0.5% decrease.
Economists expected productivity to be revised to a 4.5% annual pace, based on revisions to output and hours worked already reported.
Productivity has increased 3.1% in the past year, about double the pace that prevailed in the 1970s through mid-1990s. It's the best year-on-year growth in productivity in five quarters. Productivity increased at a 2.1% annual rate in the second quarter.
Unit labor costs have increased 1.8% in the past year, following a large downward revision in second-quarter unit labor costs from a 1.8% increase to a 1.2% decline.
The revisions to unit labor costs mean that compensation pressures, which were thought to be exploding earlier this year, actually have been rather tame.
Instead of growing at a 4.1% pace through the second quarter, as previously thought, unit labor costs are now growing at just 1.8%, less than half the rate of inflation.
Productivity, defined as output per hour worked, is perhaps the most important long-term variable in economics.
In nonfinancial corporations, productivity increased at a 3.2% pace in the third quarter and is up 4.7% in the past year. Unit labor costs increased 1.3% in the third quarter and are up 0.7% in the past year.
Unit profits fell 2.9% in nonfinancial corporations in the third quarter, the first decline in nearly two years, a period that has seen unit profits rise 47%.
In the manufacturing sector, productivity increased at a 3.4% annual pace in the third quarter while unit labor costs fell 0.3%. Manufacturing productivity is up 4.5% in the past year while unit labor costs are up 1.7%.
