Tags: Productivity | Grows | Stronger | Estimated

Productivity Grows Faster Than Expected

Wednesday, 01 Dec 2010 09:32 AM

U.S. non-farm productivity grew faster than previously estimated in the third quarter as employers squeezed more output from workers and kept costs contained, a government report said on Wednesday.

Productivity increased at an annual rate of 2.3 percent rather than the 1.9 percent pace reported last month, the Labor Department said, after contracting 1.8 percent in the second quarter.

The upward revision of productivity, a measure of hourly output per worker that is viewed as an indicator of the economy's vitality, matched economists' expectations.

The rise in productivity is another hopeful sign for the labor market since at some point companies will no longer be able to meet demand by making their operations more efficient and will need to hire new workers.

The strong productivity performance should help support corporate profits. Labor market indicators, such as initial claims for state jobless benefits and regional factory surveys point to a significant improvement in employment.

The government is expected to report on Friday that non-farm payrolls increased 140,000 in November after rising 151,000 the prior month, but that is still unlikely to reduce a 9.6 percent unemployment rate.

The productivity report also showed unit labor costs, a gauge of potential inflation pressures closely watched by the Federal Reserve, fell at an unrevised 0.1 percent rate in the third quarter. Unit labor costs increased at an upwardly revised 4.9 percent rate in the second quarter.

Economists had expected unit labor costs to be revised down to show them declining at a 0.2 percent rate in the third quarter. Strong productivity and weak labor costs are keeping inflation pressures subdued.

Concerns over low inflation were partly behind the Fed's decision to inject an additional $600 billion into the economy through government bond purchases by the middle of 2011 to push interest rates down further and stimulate demand.

The economy grew at a 2.5 percent annual pace in the third quarter, faster than the 1.7 percent rate in the second quarter, but not strong enough to lower stubbornly high unemployment.

Total non-farm output grew at a 3.7 percent rate in the July-September period instead of 3.0 percent, the Labor Department said, quickening from a 1.6 percent rate in the second quarter.

Hours worked increased at a much faster 1.4 percent rate rather than 1.1 percent in the third quarter but slower than the 3.5 percent pace in the second quarter.

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U.S. non-farm productivity grew faster than previously estimated in the third quarter as employers squeezed more output from workers and kept costs contained, a government report said on Wednesday. Productivity increased at an annual rate of 2.3 percent rather than the...
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