Worker productivity in the U.S. economy continued to grow over the last three months, with a 2.2% increase, according to the third-quarter report released Thursday from the U.S. Bureau of Labor Statistics.

The report shows output grew at an annualized, seasonally adjusted 3.5%, and hours worked increased by 1.2%. Unit labor costs in the U.S. nonfarm business sector increased 1.9% in the third quarter of 2024, “reflecting a 4.2% increase in hourly compensation and a 2.2% increase in productivity,” the report says. Unit labor costs increased 3.4% over the last four quarters.

Nationwide financial markets economist Oren Klachkin said in his analysis of the report that while the productivity gains can lead to longevity in economic growth, there are still headwinds.

He said in a news release that the dynamics outlined in the bureau’s report and a slower rise in compensation lowered unit labor cost growth to 1.9% – a “positive omen for lower [consumer price index] inflation ahead.”

“These data are somewhat encouraging, but we don’t think the post-global financial crisis low-productivity spell has been definitively broken,” Klachkin said.

The bureau calculates labor productivity, or output per hour, by dividing an index of real output by an index of hours worked by all workers, including employees, proprietors and unpaid family workers.

During the current business cycle, starting in the fourth quarter of 2019, labor productivity has grown at an annualized rate of 1.8%, reflecting a 2.5% rate of growth in output and a 0.7% rate of growth in hours worked, the report says.

According to the bureau, the 1.8% annualized rate of productivity growth in the current business cycle so far is higher than the 1.5% rate of the previous business cycle from the fourth quarter of 2007 through the fourth quarter of 2019, and below the long-term rate of 2.1% since the first quarter of 1947.

Here are some of the highlights in the report in the U.S. manufacturing sector:

• Labor productivity increased by 1% in the third quarter, while output decreased by 0.2%, and hours worked dropped by 1.2%.
• Durable manufacturing productivity rose by 0.8% with a 2.6% decrease in output and a 2.4% decrease in hours worked.
• Nondurable manufacturing sector productivity decreased 0.3%, as output increased 2.3% and hours worked increased 2.6%.
• Total manufacturing sector productivity increased 0.7% from the same quarter a year ago.

A report from MarketWatch says economists link the productivity increase to new technologies like automation, better workplace practices and more experienced employees.

“Businesses will invest in labor-saving technologies to cap their wage bills, which should exert downward pressure on inflation,” Klachkin said. “This dynamic should be especially apparent in industries with limited supplies of available workers. We think the jury’s still out on whether [artificial intelligence] will spur wholesale change in productivity and the job market.”