November 4, 2010 / 1:54 PM / 7 years ago

Non-farm productivity rises in Q3

WASHINGTON (Reuters) - U.S. non-farm productivity rose faster than expected in the third quarter and unit labor costs dropped, according to a government report on Thursday that still pointed to a sluggish recovery.

Productivity increased at an annual rate of 1.9 percent after shrinking at a 1.8 percent pace in the second quarter, the Labor Department said.

Analysts surveyed by Reuters had forecast productivity, a measure of hourly output per worker that is taken as an indicator of the economy’s vitality or lack of it, rising at a 1.0 percent rate in the third quarter.

Unit labor costs, a gauge of potential inflation pressures closely watched by the Federal Reserve, fell at a 0.1 percent rate after rising a revised 1.3 percent in the second quarter. Economists had expected unit labor costs to rise at a 0.7 percent rate in the third quarter.

The Fed announced on Wednesday it would inject an additional $600 billion into the economy through government bond purchases by the middle of next year to push interest rates further down and stimulate the sickly economy.

The economy’s recovery from the longest and deepest downturn since the 1930s has suffered a setback, leaving unemployment uncomfortably high. The economy grew at a sluggish 2.0 percent annual pace in the third quarter, a touch faster than the 1.7 percent rate in the second quarter, but way below potential.

Total non-farm output grew at a 3.0 percent rate in the July-September period, the Labor Department said, accelerating from a 1.6 percent rate in the second quarter. Hours worked increased at a slower 1.1 percent rate after a 3.5 percent pace in the second quarter.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

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