Productivity growth slows

November 5, 2004

The U.S. Department of Labor's Bureau of Labor Statistics preliminary productivity data for the third quarter of 2004 shows a 1.9 percent growth—down from the second quarter's 3.9 percent and the smallest gain since late 2002.

The 1.9 percent increase was better than the 1.7 percent rate economists forecast. The lower prediction was based on hope that businesses would begin to hire workers rather than place increased demands on fewer or current workers.

Non-farm business productivity grew 1.9 percent, as output rose 4.1 percent and hours rose 2.1 percent. The overall business sector increased 2.3 percent, as output grew 4.2 percent and hours increased 1.9 percent.

In manufacturing, productivity increased 4.3 percent, with a 5.0 percent in durable good manufacturing and 4.3 percent in nondurable goods. The increase is much lower than the 8.3 percent rise reported for the previous quarter. Output and hours in manufacturing—which comprises about 13 percent of U.S. business sector employment—tend to vary more from quarter to quarter than data for the aggregate business and nonfarm business sectors.

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