US productivity growth edged down 0.2% in the third quarter of this year, marking its first decline since the last quarter of 2015.
The latest number confirms that the gradual rise in US productivity growth since 2015, after it dropped to a low of just 0.5%, has come to a halt in 2019. Ongoing uncertainties about future US economic growth fuelled by the trade war with China, the aftermath of a massive fiscal stimulus in 2018 and lower global growth have made companies more hesitant.
Lower productivity means higher unit labour costs and lower earnings growth, the latter of which we have already witnessed in recent quarters. Given the current market circumstances, it will take a while for productivity growth to resume its upward trend.