US Productivity Increases 4.9% in Third Quarter

The pace slowed from the previous quarter but remained higher than much of the past decade.

Workers at a home under construction along the waterfront in Gig Harbor, Wash., Oct. 28, 2020.
Workers at a home under construction along the waterfront in Gig Harbor, Wash., Oct. 28, 2020.
AP Photo/Ted S. Warren

WASHINGTON (AP) — U.S. productivity increased between July and September, but at a slower pace than in the previous quarter.

Productivity advanced 4.9% in the third quarter, following an even larger 10.6% surge in the second quarter, the Labor Department reported Thursday.

Labor costs fell by 8.9% after rising by 8.5% in the second quarter.

Productivity measures the amount of output per hour of work and is a key component in rising living standards.

Even with the third quarter slowdown, productivity is higher than it has over much of the past decade. Productivity grew by a modest 1.7% for all of last year after an even slower 1.4% gain in 2018.

Economists have had parse numbers this year distorted by the pandemic, with the big surge in the second quarter revealing how employment dropped more sharply than output. With fewer workers employed, productivity at many companies was elevated.

“The data have been especially volatile quarter-to-quarter reflecting the impact of COVID-19 on the economy,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “The underlying trend in productivity will likely moderate in the near term.”

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