Strategy

U.S. Productivity Up 4.7 Percent in Q3

Year-over-year improvement was 3.1 percent, nearly double the prevailing rate of 1.6 percent from the mid-1970s through mid-1990s.
Stephen TaubDecember 6, 2005

U.S. nonfarm productivity grew 4.7 percent in the third quarter, revised upward from an earlier estimate of 4.1 percent, the Department of Labor reported.

One reason for the improvement: Labor costs fell 1.1 percent during the third quarter after dropping 0.9 percent during the prior three months, according to the report.

The year-over-year improvement in productivity was 3.1 percent — nearly double the prevailing rate of 1.6 percent from the mid-1970s through mid-1990s, according to MarketWatch, and the best year-on-year growth since early 2004.

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The data clearly shows that inflation is not a big threat to the economy. The recent retreat in oil prices further boosts the case for the Federal Reserve to wind down its tightening cycle.

White House spokesman Scott McClellan said the productivity increases over the past five years represented the fastest growth rate since World War II, according to the Associated Press. “More often than not, higher productivity means higher wages, something this president is very focused on,” McClellan reportedly said.

Even so, the wire service also pointed out that for middle-income and low-income workers, income growth has lagged, due in part to strong competition from low-wage countries.

Meanwhile, a recent survey conducted by Robert Half found that about two-thirds of chief financial officers oppose giving their employees larger raises and bonuses than they received last year.

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