U.S. Productivity Falls For the First Time Since 2015

Workers were less productive in the third quarter.

The numbers: The productivity of American workers fell in the third quarter for the first time in almost four years, reflecting a cutback in production as the U.S. economy slowed toward the end of summer.

Productivity declined at a 0.3% annual rate from July to September, the government said Wednesday. It fell a somewhat smaller 0.1% among American manufacturers.

Economists surveyed by MarketWatch had predicted a 0.6% increase in productivity.

The drop in productivity might be just temporary if the economy speeds up again, but it could also be a warning sign. Businesses reduced production in response to softer demand, especially for exports. The trade war between the U.S. and China has disrupted global supply chains and contributed to a world-wide slowdown in economic growth.

What happened: Companies increased the amount of goods and services they produced, known as output, by a solid 2.1%.

Yet the hours workers spent on the job rose an even faster 2.4%, the Bureau of Labor Statistics said Wednesday. Productivity is determined by the difference between output and hours worked.

Unit-labor costs, meanwhile, rose at a 3.6% annual rate. Over the past year these costs have climbed 3.1%, the highest year-over-year clip in more than five years.

All figures are seasonally adjusted.

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SOURCE: MarketWatch – Jeffry Bartash