Real US hourly compensation growth still in the red during the third quarter

US labor costs slipped unexpectedly during the third quarter, as wages grew more slowly than anticipated.

In annualised terms, non-farm labour productivity increased at a quarter-on-quarter clip of 3.0%, unchanged from a preliminary estimate, whereas hourly compensation rose by 2.7%, resulting in a 0.2% dip in unit labour costs, according to the Department of Labor.

Economists had projected a 3.2% rate of increase in productivity and a 0.3% rise in labour costs.

Versus a year-ago, productivity was 1.5% higher and labour costs 0.7% lower.

In parallel, hourly compensation was only up by 0.8% and down by 1.1% when adjusted for changes in the price level.

Reacting to the data, Blerina Uruci at Barclays Research said: "Unit labor costs fell -0.7% y/y and in recent quarters have reversed the buoyant increase of recent years, suggesting that the trends of productivity and unit labor costs are likely to converge in the coming quarters. On the compensation side, there has been a continued slowdown in recent quarters as compensation per hour as well as employee hours worked have slowed."