US non-farm worker productivity increased at the strongest rate in four years during this year's third quarter, the government said today 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 per cent gain.
It was the strongest growth in productivity since a 10.4 per cent surge in the third quarter of 2003 and was more than double the revised 2.2 per cent 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 per cent in the third quarter after growing a revised 2.2 per cent rate in the second quarter. Wall Street economists had forecast that unit labor costs would grow by 1 per cent.
"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 US 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 per cent 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.