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Productivity eased to a 2.2% annualized rate in Q3, but that was still well-above the expansion’s average, explained analysts at Wells Fargo. They see that stronger productivity over the past year has helped to keep a lid on unit labor costs.

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“Another stellar quarter in output growth led to a solid rise in productivity growth in the third quarter. Productivity growth at U.S. businesses rose at a 2.2% pace. That marks a slowdown from the previous quarter and is up a more modest 1.3% on a year-ago basis, but is still a notable improvement since the early years of this expansion when productivity growth was improving by less than one percent on trend.”

“Although ULCs (unit labor costs) continue to rise, the pace has eased over the past year amid the rebound in productivity. That offers some support to the view that inflation pressures remain fairly modest.”