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US productivity edges down 0.2% in third quarter

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US productivity edges down 0.2% in third quarter

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MARTIN CRUTSINGER AP Economics Writer

December 10, 2019 at 1:51 pm

2 min reading

US productivity declined in the summer, the first decline in nearly four years, underscoring the struggles companies face to increase worker efficiency.

The Labor Department reported on Tuesday that productivity fell at a seasonally adjusted annual rate of 0.2% in the July-September quarter, the first quarterly decline since the fourth quarter of 2015. The new report represented a slight revision of a initial estimate of 0.3% drop in productivity.

Labor costs increased at an annual rate of 2.5% in the third quarter, a strong rebound from a small increase of 0.1% in the second quarter.

Productivity, the amount of production per hour of work, is crucial for improving living standards. Increased output means that employers can pay their workers more with increased output without having to raise their prices, a measure that can trigger higher inflation.

However, productivity gains during the current record expansion, now in its 11th year, were significantly below average, with annual gains of only 1.3% from 2007 to 2018. This is only half of annual productivity gains of 2%. , 7% observed from 2000 to 2007.

President Donald Trump sold his $ 1.5 trillion cut in 2017 in part as a way to boost productivity by boosting companies' investment in computers, machines and other equipment to increase productivity. However, in recent quarters, business investment has been weak.

Last year, productivity grew 1.5%, while labor costs increased 2.2%. The moderate rise in labor costs, even with unemployment falling to half a century, was one of the main reasons why the Federal Reserve was the main reason why the Federal Reserve felt it had room to cut interest rates. three times this year to stimulate economic growth without worrying. that the movements could trigger unwanted inflation.

The Fed is holding its last meeting of the year this week and, when announcing its rate decisions on Wednesday, the high expectation is to keep rates unchanged, arguing that it has done enough for now to provide an insurance policy for the economy. against such threats as President Donald Trump's trade wars with China and other nations.

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