Productivity Rises At Fastest Pace In Six Years In Third Quarter

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Labor productivity increased by much more than expected in the third quarter, according to the preliminary report released by the Labor Department on Thursday, with the report also showing a bigger than expected decrease in labor costs.

The report showed that productivity increased by 9.5 percent in the third quarter following a revised 6.9 percent increase in the second quarter. Economists had expected productivity to rise by 6.5 percent compared to the 6.6 percent growth originally reported for the previous quarter.

Productivity growth in the third quarter marked the fastest pace of growth since the third quarter of 2003, when productivity increased by 9.7 percent.

The sharp rise in productivity, which is a measure of output per hour, came as output showed a notable increase despite a continued decrease in hours worked.

Output increased by 4.0 in the third quarter after falling by 1.1 percent in the second quarter, while hours worked fell by 5.0 percent in the third quarter following a 7.5 percent drop in the second quarter.

As mentioned above, the Labor Department also said unit labor costs fell by 5.2 percent in the third quarter after falling by a revised 6.1 percent in the previous quarter. The drop in costs was far steeper than the 3.2 percent decrease expected by economists.

Chris Low, chief economist at FTN Financial, said, "It was the third consecutive drop in labor costs, suggesting considerable room for price cuts if companies decide to pursue market share in the nascent recovery."

"There should be plenty more good news in the year ahead," Low added. "The fastest growth in productivity usually comes in the first year or two after a recession."

In other economic news, the Labor Department released a separate report on initial jobless claims in the week ended October 31st, showing that first-time claims for unemployment benefits fell by more than economists had been anticipating.

The report showed that jobless claims fell to 512,000 from the previous week's revised figure of 532,000. Economists had been expecting jobless claims to edge down to 522,000 from the 530,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since claims came in at 488,000 in early January, the last time claims were below 500,000.

Labor productivity increased by much more than expected in the third quarter, according to the preliminary report released by the Labor Department on Thursday, with the report also showing a bigger than expected decrease in labor costs. The report showed that productivity increased by 9.5 percent in the third quarter following a revised 6.9 percent increase in the second quarter. Economists had expected productivity to rise by 6.5 percent. (Market News Provided by RTTNews)