DATA SNAP: US 3Q Productivity Surges By Most In Six Yrs

==================================================================== 
3Q Productivity - Preliminary Report           !                   ! 
 Key Numbers:                    3Q       2Q   ! Consensus         ! 
     Non-Farm Productivity    +9.5%    +6.9%r  !            +7.0%  ! 
     Unit Labor Costs         -5.2%    -6.1%r  ! Actual:    +9.5%  ! 
==================================================================== 
 
   By Jeff Bater 
   Of DOW JONES NEWSWIRES 
 

WASHINGTON -(Dow Jones)- U.S. productivity grew during the third quarter by the most in six years as the economy recovered from severe recession and employers kept firing workers to save money.

Non-farm business productivity rose a much more-than-expected 9.5% at an annual rate last quarter, the Labor Department said in preliminary figures released Thursday.

Economists surveyed by Dow Jones Newswires had predicted a 7.0% increase in third-quarter productivity.

The increase gives the Federal Reserve room to maintain an easy money policy. The central bank on Wednesday affirmed its plan to keep interest rates low for an extended period. Policymakers voted to maintain the target federal-funds rate for interbank lending at a record-low range of zero to 0.25%.

Productivity is defined as output per hour worked. It rose 6.9% in the second quarter of the year, revised up from a previously estimated increase of 6.6%.

A key gauge within the report of inflationary pressures plunged. Unit labor costs fell 5.2% last quarter at an annual rate. Economists had expected a 4.5% decline. Second-quarter unit labor costs fell 6.1%, a revision down from a previously estimated 5.9% drop.

Higher productivity means companies are more efficient, boosting profits by cutting costs. And, in times of low inflation, it can mean fatter paychecks for those still working.

Big productivity gains aren't uncommon at the end of a recession or beginning of a recovery. But the increases come at the expense of jobs.

The economy grew 3.5% July through September, after 16 months of decline. Yet layoffs continued, albeit at a much lighter pace than at the depth of the recession. In September, non-farm payrolls fell by 263,000 jobs. October payroll figures are due out of the Labor Department on Friday, and more layoffs are expected - not as many as in September, though. Joblessness is putting a lid on consumer spending; restrained spending, in turn, will chill economic growth and mute the recovery.

Thursday's data on productivity said third-quarter non-farm business output rose 4.0%, at an annual rate.

Hours worked fell 5.0% last quarter - the ninth quarterly decrease in a row.

Hourly compensation in the non-farm business sector increased 3.8%. Real compensation, adjusted for inflation, rose 0.2%.

 
   -By Jeff Bater, Dow Jones Newswires; 202 862 9249; jeff.bater@dowjones.com 
 

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(END) Dow Jones Newswires

November 05, 2009 08:45 ET (13:45 GMT)


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