U.S. Worker Productivity Report

WASHINGTON (Reuters) – U.S. worker productivity increased moderately in the third quarter, leading to a gradual slowdown in labor costs, which may impact the inflation outlook.

Nonfarm productivity, measuring hourly output per worker, rose at a 2.2% annualized rate last quarter, according to the Labor Department's Bureau of Labor Statistics.

Revised data for the second quarter indicated productivity growing at a 2.1% pace, down from the previously reported 2.5%. Economists polled by Reuters anticipated a 2.3% increase.

On a year-over-year basis, productivity increased at a 2.0% pace, a moderate growth that could complicate inflation and interest rate forecasts.

Unit labor costs, reflecting the price of labor per unit of output, escalated at a 1.9% rate from July to September, following a 2.4% rise in the second quarter. Year-over-year, labor costs surged by 3.4%.

The Federal Reserve is expected to announce another interest rate cut on Thursday, projecting a decrease of a quarter point to the 4.50%-4.75% range. This follows a significant half-percentage-point cut initiated in September, marking the first borrowing cost reduction since 2020. In 2022 and 2023, rates were increased by 525 basis points.

Compensation grew at a 4.2% rate last quarter, down from 4.6% in Q2, and has increased by 5.5% from a year ago.