Como se combate o populismo? "Com eleições", responde Fukuyama

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8:30am 12/06/05 U.S. REAL HOURLY COMPENSATION UP 1.2% IN PAST YEAR
8:30am 12/06/05 U.S. UNIT LABOR COSTS UP 1.8% IN PAST YEAR
8:30am 12/06/05 U.S.3Q UNIT LABOR COSTS FALL 1.0% VS. UP 0.8%
8:30am 12/06/05 U.S. 2Q UNIT LABOR COSTS REVISED TO -1.2% VS. UP 1.8%
8:30am 12/06/05 U.S. 3Q NONFINANCIAL UNIT LABOR COSTS UP 1.3%
8:30am 12/06/05 U.S. 3Q NONFINANCIAL PRODUCTIVITY UP 3.2%
8:30am 12/06/05 U.S. PRODUCTIVITY UP 3.1% IN PAST YEAR
8:30am 12/06/05 U.S. 3Q PRODUCTIVITY REVISED TO 4.7% ANNUALIZED VS. 4.1%

ECONOMIC REPORT: U.S. productivity revised up to 4.7%; Unit labor costs fall 1% in third quarter
By Rex Nutting, MarketWatch
Last Update: 8:53 AM ET Dec. 6, 2005

WASHINGTON (MarketWatch) - Productivity of the U.S. nonfarm business sector surged at a 4.7% annual rate in the third quarter, the fastest rate in two years, the Labor Department said Tuesday.

The fresh numbers are a revision to month-old numbers that showed productivity rose at a 4.1% pace.

Unit labor costs - a gauge of wage-push inflationary pressures - fell at a 1% annual pace in the quarter, revised down from a 0.5% decrease. Unit labor costs are the costs paid to workers to produce one "unit" of output.

Economists expected productivity to be revised to a 4.5% annual pace, based on revisions to output and hours worked already reported.

Productivity has increased 3.1% in the past year, about double the pace that prevailed in the 1970s through mid-1990s. It's the best year-on-year growth in productivity in five quarters. Productivity increased at a 2.1% annual rate in the second quarter.

Unit labor costs have increased 1.8% in the past year, following a large downward revision in second-quarter unit labor costs from a 1.8% increase to a 1.2% decline.

The revisions to unit labor costs mean that compensation pressures, which were thought to be exploding earlier this year, actually have been rather tame.

Instead of growing at a 4.1% pace through the second quarter, as previously thought, unit labor costs are now growing at just 1.8%, less than half the rate of inflation.

Real hourly compensation (adjusted for inflation) is up 1.2% in the past year.

Although the new figures will likely show much less inflationary pressures from labor costs, that doesn't mean the Federal Reserve will change course and end its tightening campaign.

The Fed is expected to raise its short-term interest rate target for a 13th straight time at the meeting next Tuesday.

"The Fed is already changing the rationale for tightening to 'inflation expectations,'" said Neal Soss, chief economist for CSFB before the release. "The 'unit labor cost' story just doesn't hold water."

Joseph LaVorgna, chief U.S. fixed income economist for Deutsche Bank, said unit labor costs "are a statistically insignificant predictor of inflation" anyway. "Core inflation could head higher even if unit labor costs do not."

Productivity, defined as output per hour worked, is perhaps the most important long-term variable in economics.

Higher productivity can mean higher profits, wages and living standards and can keep inflationary pressures at bay. But the concept is difficult to measure, especially in financial services where the concept of a "unit" of output is murky.

In nonfinancial corporations, productivity increased at a 3.2% pace in the third quarter and is up 4.7% in the past year. Unit labor costs increased 1.3% in the third quarter and are up 0.7% in the past year.

Unit profits fell 2.9% in nonfinancial corporations in the third quarter, the first decline in nearly two years, a period that has seen unit profits rise 47%.

In the manufacturing sector, productivity increased at a 3.4% annual pace in the third quarter while unit labor costs fell 0.3%. Manufacturing productivity is up 4.5% in the past year while unit labor costs are up 1.7%.