The third quarter of 2014 has ushered in better-than-expected labor productivity reports and higher worker compensation, according to the U.S. Department of Labor’s Bureau of Labor Statistics (BLS).
Both findings bode well for the economy as a whole, as the county continues to climb out of recession.
In the nonfarm business sector, BLS indicated a labor productivity increase of a 2% annual rate during the third quarter of 2014. Output increased 4.4% and hours worked increased 2.3%. All rates are seasonally adjusted annual rates.
The third quarter 2014 numbers show a rise in productivity of 0.9% over the third quarter of 2013. Output rose 3% and hours worked increased 2.1%.
The 2014 third quarter growth of 2% was higher than the 1.5% economists predicted going into the quarter.
BLS estimates labor productivity, which means output per hour, by dividing an index of real output by an index of hours worked of all persons. This includes employees, proprietors and unpaid family workers.
Productivity in the manufacturing sector was also up in BLS’ third quarter report. It increased 3.2% in the third quarter of 2014 as output also increased 4.1% and hours worked grew by 0.8%.
Durable goods manufacturing saw productivity increases of 4.2%, which represents a 6.6% increase in output and a 2.3% increase in hours. A 3.0% growth in productivity was logged in the nondurable goods arena, as well, with output up 1.2 percent and hours worked down 1.8%.
While productivity is up, so too are compensation rates. BLS estimates the unit labor costs in the nonfarm business sector grew by 0.3% in the third quarter of 2014.
The 2.3% increase in hourly earnings was greater than the 2% increase in productivity. Labor costs have increased 2.4% overall during the last four quarters.
BLS calculates the labor costs per unit as a ratio of hourly wages to labor productivity. Increases in hourly compensation increase unit labor costs while increases in output reduce them typically.
In the manufacturing sector, unit labor costs decreased by 0.7% in the third quarter of 2014. They have, however, grown by 0.6% versus the same quarter last year.
While growth in both productivity and compensation are modest, the rise in compensation is a positive sign for the economy. Year over year, compensation is up 3.3%, according to Reuters, which is the fastest growth since 2012’s fourth quarter.
