Productivity rises by most in nearly four years
WASHINGTON (Reuters) - U.S. nonfarm productivity rose the most in nearly four years in the third quarter but a drop in unit labor costs underlined a lack of inflation pressure, bolstering arguments for the U.S. Federal Reserve to maintain its massive monetary stimulus.
Productivity rose at a 3.0 percent annual rate after increasing at a 1.8 percent pace in the second quarter, the Labor Department said on Monday, driven by a 4.7 percent rise in output.
The data revised up an earlier estimate and was slightly above the 2.8 percent increase analysts forecast in a Reuters poll. It was the largest rise since the fourth quarter of 2009.
Productivity, which measures hourly output per worker, was 0.3 percent higher compared to the same period last year.
Unit labor costs - a gauge of the labor-related cost for any given unit of output - fell at a 1.4 percent rate in the third quarter, roughly double the originally estimated fall, underscoring the lack of wage-related inflation pressures in the economy. Unit labor costs had risen at a 2.0 percent pace in the second quarter.
The Federal Reserve is likely to consider subdued inflation when it meets this week. Over the last year, inflation has been well below the U.S. central bank's 2 percent target, which has led some analysts to expect it will be slow about winding down its bond-buying program.
Economists polled by Reuters had expected unit labor costs to fall at a 1.3 percent pace in the July-September quarter. Labor costs were up 2.1 percent from a year ago.
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