In the third quarter, labor productivity dropped at the fastest rate in a long time according to a Labor Department report.
Importantly, in a measure of output versus energy, nonfarm business sector productivity dropped 5.2% from the previous three-month period. The result surpassed expectations. The labor productivity rate dropped at the fastest pace since the second quarter of 1960.
Labor productivity rate fell as output increased 1.8% while hours worked rose 7.4%. People should keep in mind that, on a year-over-year basis, productivity fell 0.6%, which itself was the biggest decline in a long time.
Labor Department and its report
Inflation also was evident in the Labor Department’s report. However, let’s have a look at other interesting details as well. For example, unit labor costs or the measure of how much businesses pay their per unit output jumped 9.6%. Notably, the result reflected a 3.9% increase in compensation combined with the decline in productivity.
It is worth noting that higher levels of productivity can offset wage increases when determining unit labor costs. On the contrary, lower levels raise the number.
Officials from the Federal Reserve are closely monitoring the state of the labor market. Low productivity levels tend to support inflation as companies are forced to raise prices. They have to spend more money in order to pay for various services and goods.
The country’s economy currently is in the midst of its fastest inflation spurt in more than 30 years. People have to pay more and more money for basic necessities. Last month, during their Fed officials expressed concern about inflation. They are willing to raise interest rates if prices keep rising.