Third Quarter Productivity Surges
The Labor Department reported Thursday that productivity surged in the third quarter, showing the largest grow in six years. This will allow companies to profit; however with costs continuing to drop sharply, employees will not see the benefit of the increased productivity.
Productivity rose at an annual rate of 9.5 percent in the third-quarter, far better than the 6.4 percent that the economists had expected.
While productivity was on the rise in the third quarter, unit labor costs fell at a rate of 5.2 percent, above the 4 percent that economists forecasted. This was the third-straight quarter that labor costs fell.
Like with past economic recoveries, productivity will increase at the onset. However as workers continue to experience employer cutbacks as a result of cost cutting initiatives, the consumer may be tight with spending, slowing the economic recovery.
Productivity is integral to the recovery of the economy. The higher the productivity, the higher the company profit potential. This lead to higher wages and more consumers spending money.
The productivity growth is another indicator that the economy is coming out of the recession, following the 3.5 percent Gross Domestic Product annual growth announced last week.
The squeeze in the income for families could continue as economists predict that the unemployment rate will edge to 9.9 percent when the numbers are reported on Friday. The jobless rate could reach a 10.5 percent peak before the economy stabilizes enough to start pushing the number back down during mid-2010.
Stocks Mentioned
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
