Labor costs and productivity divert in Q3

During the third quarter, U.S. productivity fell 0.3% from the previous quarter while labor costs rose 3.6%. The decline in productivity was the first quarter of negative growth since the fourth quarter of 2015. The number points to a less efficient economy, particularly when accounting for the rising trend in labor costs.

Labor cost growth trends are more volatile than productivity but appear to eventually catch up. The two have historically moved in step with costs lagging a quarter behind; quarters of negative productivity growth have been followed by labor cost declines six times in similar instances since 2010.