Labor productivity rate falls at fastest rate since 1960

Labor productivity fell at its fastest rate in more than 60 years in the third quarter, according to a Labor Department report on Tuesday.

A measure of output versus energy, nonfarm business productivity fell 5.2% from the previous three-month period, worse than the Dow Jones estimate for a 5% decline, and was the worst level since the second quarter of 1960. The drop was caused by a 1.8% increase in output while working hours increased by 7.4%.

On a year-over-year basis, productivity fell 0.6 percent, the largest decline since the second quarter of 1993.

Inflation is also evident in report.

Unit labor costs, or a measure of how much businesses pay per unit of input, rose 9.6% from the second quarter, reflecting a 3.9% increase in bonuses combined with a decline productivity. This is much higher than the Dow Jones estimate of 8.4%.

Higher productivity levels can offset wage increases when determining unit labor costs, but lower levels raise the numbers.

Federal Reserve officials closely monitor productivity data for its impact on inflation. Low levels of productivity tend to fuel inflation as firms are forced to raise prices as unit labor costs rise and profit margins come under pressure.

The economy is currently in a phase Fastest inflation in more than 30 yearsand Fed officials are expected to start tightening monetary policy to combat rising prices. Labor productivity rate falls at fastest rate since 1960


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