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Economic Report: U.S. productivity picks up a bit in third quarter. After two hefty declines ‘any gain is welcome’.

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The numbers: U.S. productivity rose at a 0.3% annual clip in the third quarter, the government said Thursday. That’s the first gain after two straight sharp quarterly declines.

Economists surveyed by MarketWatch had projected a 0.5% increase. 

Over the past 12 month, U.S. productivity declined at a 1.4% pace, slightly less than the 2.1% rate in the second quarter. 

Key details: Output in the third quarter rose 2.8%. Hours worked rose 2.4%. 

Unit-labor costs, a key measure of wages,  cooled to a 3.5% gain in the third quarter, down from 8.9% in the past three months.

Year-over-year unit labor costs jumped 13.9% in the third quarter after a drop of 11.9% in the second quarter. 

Big picture: Labor productivity is hard to measure and the pandemic didn’t make it any easier. But it is key to the outlook for the economy.

“With structurally slower growth in labor supply, faster trend productivity growth will be critical in keeping the U.S. economy from being relegated to the slow lane,” said Richard Moody, chief economist at Regions Financial Corp.

Market reaction: Stocks
DJIA,
-1.55%

SPX,
-2.50%

were set to open lower on Thursday after Fed Chairman Jerome Powell signaled the peak of interest rates would be higher than 4.75%. The yield of the 10-year Treasury note
TMUBMUSD10Y,
4.180%

rose close to 4.2%.

: The Federal Reserve’s Jerome Powell aims to set things straight but leaves us dazed and confused

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