They’re only preliminary, but the manufacturing labor productivity numbers for the third quarter released by the Labor Department this morning were total stunners. They showed that, by this narrowest measure of efficiency, manufacturing’s performance worsened sequentially by 5.13 percent at an annual rate. If it holds, that would be the biggest quarter-to-quarter decline since the first quarter of 2009 (during the depths of the last recession), when it plunged by a dizzying 17.37 percent.
(Labor productivity examines manufacturing’s efficiency according to how much output is produced by each hour that a worker is on the job. Economists also measure productivity by looking at a greater number of inputs – like capital, energy, and materials – in addition to labor. But the government data on this total factor productivity, or multi-factor productivity, comes out on a less timely basis.)
The only good news for industry in the new report from the Labor Department is that the second quarter’s annualized labor productivity growth was revised up from 2.82 percent to 3.39 percent.
As a result of these new statistics, labor productivity in manufacturing is up by 20.93 percent during the current economic expansion – which began in the second quarter of 2009. That may sound pretty good, but during the previous expansion, which was much shorter, it rose by 41.23 percent. And during the expansion before that (which was a bit longer), it advanced by 46.81 percent. So we’re still seeing a major slowdown.
The non-farm business sector (the Labor Department’s main measure of the entire economy) fared much better on the labor productivity front, with third quarter annualized growth of 2.97 percent. That’s the best such result since the third quarter of 2014 (4.34 percent). The second quarter annual growth rate of 1.53 percent was unchanged.
Still, even this performance leaves non-farm business labor productivity in the doldrums historically speaking. It’s increased by just 9.45 percent during the current recovery – much slower than manufacturing’s rise, and much slower than its own 16.03 percent and 23.25 percent improvements during the two previous recoveries.
But let’s end this particular post on a (somewhat) positive note. The final second quarter productivity growth figures were revised up twice for manufacturing and once for the non-farm business sector. So maybe the next Labor Department report will show better productivity performance as well. Since strong productivity growth is a key to boosting living standards on a lasting basis, that would be about the best economic news any American could imagine.