"The United States economy is producing more goods and services with surprising efficiency, handing policymakers a welcome economic buffer but leaving analysts scrambling to explain exactly what is fueling the engine. According to a research note released Friday by Morgan Stanley, third-quarter GDP data revealed a "surge" in nonfarm productivity growth to an annualized rate of 4.9%. This marks the second consecutive quarter of substantial gains, soaring well above the four-quarter average of just 1.9%."
"While a spike in productivity-essentially the measure of how much output a worker creates per hour-is generally viewed as the "magic bullet" for economic growth without inflation, chief economist Michael Gapen insisted that the root cause of this specific acceleration remains elusive. "We believe much of the rise is cyclical," Morgan Stanley economists noted in the report, adding that "it remains an open question as to what is driving the productivity acceleration.""
"In fact, the labor market has been mired in at least a "low-hire-low-fire" mode for much of the last year, while Apricitas Economics even dubbed it " the no-hire economy." For the last five months, Joseph Politano wrote on his Substack on Jan. 11, the economy added functionally zero jobs, with its 44,000 monthly average the lowest since 2020 and below any single year of the 2010s."
U.S. nonfarm productivity rose sharply to an annualized 4.9% in the third quarter, the second consecutive quarter of large gains and well above the four-quarter average of 1.9%. Morgan Stanley economists view much of the increase as cyclical but describe the underlying drivers as uncertain. Firms appear to be maintaining or increasing output while hiring less, reflecting pandemic-era efficiencies and a prolonged low-hire labor market. Monthly job gains averaged about 44,000, the weakest since 2020, while sustained demand, supported by wealthier households, has helped prop up output despite muted hiring.
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