Manufacturing Productivity Jumps 5.4 Percent in Third Quarter

The Bureau of Labor Statistics reported that nonfarm business labor productivity rose 3.1 percent in the third quarter, with unit labor costs falling 2.4 percent. (All percentages are in annual rates of growth.) For manufacturers, we saw a return to healthy 5.4 percent jump in productivity. For durable goods industries, the increase was even larger at 9.9 percent. Other than in the second quarter, we have seen large increases in productivity in the manufacturing sector – which has outpaced nonfarm significantly – over the past two years. This has helped to keep manufacturers competitive in global markets. Manufacturing unit labor costs fell 4.6 percent in the third quarter, for instance, with durable goods costs declining by more than nondurables (down 5.2 percent versus 3.0 percent).

Behind these statistics, of course, are the gains in output for the sector. Durable goods output grew 8.3 percent in the third quarter, a sizable increase from the 1.7 percent rise in the second quarter. The slower productivity growth among nondurables stems from its output rising just 1.0 percent for the quarter. Still, that is an improvement from the second quarter when it fell by 1.0 percent. Overall, these numbers are another sign that the manufacturing sector is starting to recover from a weak second quarter, with durable goods leading the way. If these gains in productivity can be sustained, manufacturing employment will follow suit.

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