Manufacturing labor productivity in the U.S. increased 4.9 percent in the third quarter, up from 2.1 percent in the second quarter, according to a report released today by the Bureau of Labor Statistics.
This is the largest gain since a 6.1 percent increase in the third quarter of 2011.
Contributing to the 4.9 percent gain is an increase in output (2.7 percent) combined with a decline in the number of hours worked (2.1 percent).
Despite the increase in output per hour for all people working, the decrease in hours worked resulted in a 5.9 percent jump in hourly compensation, and, therefore, unit labor costs rose 0.9 percent, according to the National Association of Manufacturers.
“In general, we want unit labor costs to fall, as the improvements in efficiency help to make manufacturers more competitive globally,” said Chad Moutray, chief economist for the National Association of Manufacturers.
Productivity in the durable goods manufacturing sector increased 7.3 percent, which is the largest gain since the third quarter of 2011, when it was up 8.7 percent.
The National Association of Manufacturers pointed out that output rose by 3.5 percent but hours worked dropped by 3.6 percent.
“These gains were enough to reduce unit labor costs for durable goods firms by 1.4 percent,” Moutray said.
Meanwhile, in the nondurable goods sector, productivity increased 1.3 percent and output increased 1.8 percent.
“Along those lines, unit labor costs for nondurable goods manufacturers increased by 4.8 percent in the third quarter, with the number of hours worked inching up by 0.5 percent and hourly compensation costs rising by 6.2 percent,” Moutray said.
Over the last four quarters, manufacturing productivity increased 1.5 percent, as output increased 1.8 percent and hours increased 0.4 percent. Unit labor costs in manufacturing increased 0.9 percent in the third quarter of 2015 and increased 0.5 percent from the same quarter a year ago.
Locally, manufacturing activity indicated a slight improvement in October, although it continued to be in negative territory for the seventh straight month.
The seasonally adjusted Purchasing Managers Index was at 46.66 in October, up from 39.44 in September, according to the Marquette-ISM Report on Manufacturing.
Any number more than 50 indicates growth, while less than 50 signals contraction. The PMI has been at or above 50 for 17 of the past 26 months.
Get more economic data at the BizTracker page, a collection of BizTimes Milwaukee’s economic data reports.
