Labor productivity in the nonfarm business sector of the US increased by 2.2% in the third quarter of 2024, a figure that was unchanged from the previous projections. A 1.2% increase in hours worked and a 3.5% increase in output were the primary reasons for this productivity increase. Productivity increased by 2.0% in the previous year. After a 1.1 percentage point revision, unit labor costs— determined by comparing hourly compensation to productivity—now show a 0.8% increase, while compensation increased by 3.1%. In Q3 2024, real hourly payments increased by 1.8% after accounting for inflation.
The output per hour worked, or labor productivity has increased at an annualized pace of 1.8% since late 2019, which is a bit higher than the 1.5% rise that occurred throughout the last business cycle (2007-2019). Productivity increased by just 0.9% in the manufacturing sector, while output decreased by 0.4% and hours worked decreased by 1.3%. In the manufacture of durable items, productivity increased by 0.7%, but in the manufacturing of nondurable goods, productivity decreased by 0.6%. Manufacturing labor costs were lower per unit, with a 1.7% overall rise mostly attributable to lower compensation revisions.
In the current business cycle, manufacturing worker productivity has increased at an annualized pace of only 0.2%, while production has not increased, and hours worked have slightly decreased. Although this growth is better than the 0.1% growth of the previous cycle, it is still less than the 2.1% long-term average.
There were more notable improvements in the non-financial corporate sector, which is a vital sector of the economy. In Q3 2024, output grew 4.2%, which led to a 3.4% improvement in productivity. These companies’ unit profits increased by 0.5% over the same timeframe.
These figures are based on revised output and compensation data as well as data from other sources, including the Bureau of Economic Analysis. The most significant changes were made to the manufacturing sector, namely to its growth rate for the first quarter of 2020.
In the future, the Q4 2024 productivity and costs report will be published on February 6, 2025.
Source: U.S. Bureau of Labor Statistics