Ahead of the Bell: Productivity

Productivity probably edged up a slight 0.9 percent annual rate in the third quarter, according to the consensus view of economists surveyed by Thomson Reuters. That would represent a weaker outcome than the 1.1 percent productivity growth rate originally reported a month ago.

The expectation for weaker growth reflects the fact that the government revised its estimate of total output, as measured by the gross domestic product, to show it declining at an annual rate of 0.5 percent, slightly below the 0.3 percent GDP performance initially estimated.

The Labor Department is scheduled to release the report on productivity Wednesday at 8:30 a.m. EDT.

The department also will make a new estimate on the performance of labor costs in the third quarter. Economists expected that would show an increase of 3.6 percent at an annual rate in unit labor costs, unchanged from the previous estimate.

The Federal Reserve closely monitors productivity and labor costs to see whether inflation is becoming a problem. While rising wages and benefits are good for workers, if those gains outstrip increases in productivity it can create serious inflation problems as businesses are forced to boost the cost of their products to cover the higher wage demands.

If workers are more productive, though, businesses are able to increase their pay and cover the costs with the increased output of goods and services.

Inflation concerns practically disappeared last month after a report showed that consumer prices in October took their biggest monthly plunge in the six decades that records have been kept--a reprieve for shoppers but a danger sign for the economy because falling prices can make a mild recession spiral into something worse.

A panel of economists with the National Bureau of Economic Research announced Monday that the country has been in a recession since December 2007.

That would make the current recession, at 12 months and counting, the longest downturn since the 1981-82 recession, which lasted 16 months. Many economists believe that economic growth in the current quarter will slow even more sharply than the 0.5 percent decline of the third quarter. Some are projecting a drop in GDP at an annual rate of 4 percent.