December 10, 2024
Non-farm productivity rose 2.2% in the third quarter after climbing 2.1% in the second quarter. The third quarter increase consisted of a 3.5% increase in output combined with a 1.2% increase in hours worked. Hence, a 2.2% increase in productivity in that quarter. In the past year productivity has risen 2.0% which remains quite rapid.
Productivity data are notoriously volatile so reading much into movements that occur over a couple of quarters is risky. But it is possible that because firms have been unable to hire as many workers as they wanted for the past couple of years they have been spending a lot of money on technology to boost output without increasing headcount. It could be that all of that spending on technology is beginning to pay dividends in the form of faster growth in productivity. We think that is the case and, as a result, we expect productivity growth to continue at a rate far in excess of the 1.2% pace it has registered on average in the past 23 years. Our expectation is that it will grow 2.2% in 2025.
Stephen Slifer
NumberNomics
Charleston, SC
Follow Me