Implications: Productivity was revised up substantially for the third quarter, consistent with the upward revision for real GDP growth. Output was revised up while the number of hours worked stayed the same, which means more output per hour. Productivity is up only 0.3% in the past year, versus an average annual growth rate of about 2% over the past couple of decades. However, we do not think this means the productivity revolution has come to an end. It is not unusual for productivity to surge at the very beginning of a recovery and then temporarily slow down as hours worked increase more sharply. We believe the long-term trend in productivity growth will remain strong, due to a technological revolution centered in computer and communications advances. In fact, Q3 productivity rose at the fastest rate since Q4 2009. It's nothing to write home about, but it's consistent with a plow horse economy. In other news this morning, the Empire State index, a measure of factory sentiment in New York, rose to +1.0 in December from -2.2 in November.
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