Productivity implies growth without inflation
Non-farm worker productivity increased at the strongest rate in four years during this year's third quarter, the government said on Wednesday in a report implying the economy could keep growing without generating inflation.
Productivity, or hourly output per worker, increased at a seasonally adjusted 4.9 percent annual rate in the third quarter, the Labor Department report showed. That was well ahead of Wall Street economists' forecasts for a 3 percent gain.
It was the strongest growth in productivity since a 10.4 percent surge in the third quarter of 2003 and was more than double the revised 2.2 percent gain in productivity posted during the second quarter.
Unit labor costs, a gauge of inflation and profit pressures that Federal Reserve policy makers monitor closely, contracted by 0.2 percent in the third quarter after growing a revised 2.2 percent rate in the second quarter. Wall Street economists had forecast that unit labor costs would grow by 1 percent.
It's a positive signal for growth and it also shows less inflationary pressure. It's very encouraging for the Fed, said economist Michelle Meyer of Lehman Brothers in New York.
Stock futures reduced losses after the favorable productivity data was issued but remained in negative territory while U.S. Treasury debt prices were broadly higher.
The department said the number of hours worked by employees in the non-farm sector shrank at a 0.5 percent rate during the third quarter after growing at a revised 2 percent rate in the second quarter. It was the sharpest decline in hours worked since a 1.3 percent decline in the second quarter of 2003.
Hourly compensation gained at a 4.7 percent rate, up from 4.4 percent in the second quarter. But the department said that after the rise in consumer prices during the period was taken into account, real hourly compensation per worker was up a more modest 2.7 percent after declining 1.5 percent in the second quarter.
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