The preliminary seasonally-adjusted annual rates of productivity growth in the third quarter were 1.3 percent in the business sector and 1.1 percent in the nonfarm business sector. In both sectors, productivity gains were the result of hours at work falling faster than output, and were smaller than in the first two quarters of 2008.

Business sector output per hour grew at a seasonally adjusted annual rate of 1.3 percent in the third quarter of 2008 as output decreased 1.5 percent and hours worked fell 2.8 percent. Productivity increased 1.1 percent in the nonfarm business sector in the third quarter of 2008; output and hours fell 1.7 percent and 2.7 percent, respectively. The decline in nonfarm output was the largest since third-quarter 2001, and the drop in hours was the largest since the first quarter of 2002.

Productivity reports are generally thought to be more oriented to long-term analysis than to flashy interpretation of cyclical developments. However, the switch from output growth to decline, which we first picked up in the GDP report on October 3, had some impact here. The swing in nonfarm output growth rate was fully 4.5 percentage points, far larger than the decline in hours. Hours, on a more pessimistic note, have declined in six of the past seven quarters, with the most recent cuts characterized as the "largest since the first quarter of 2002." The next update on productivity will be the revised version of these data on December 3. (BLS)