U.S. workers increased their productivity by the most in almost four years in the third quarter, adding to signs of stronger economic growth, while a drop in unit labor costs highlighted a lack of inflation pressure, the government reported Monday. The Labor Department said productivity-the amount of output per hour worked-increased at a 3 percent annual rate in the July-September quarter, up from an initial estimate of 1.9 percent and much stronger than the 1.8 percent rate recorded in the second quarter. Third-quarter productivity was the strongest since the fourth quarter of 2009, and it was 0.3 percent higher than during the same period a year ago. Unit labor costs-a measure of the labor-related cost for any given unit of output-fell at a 1.4 percent rate in the third quarter, double the originally estimated decline, underscoring the lack of wage-related inflation pressures in the economy. Unit labor costs rose at a 2 percent pace in the second quarter. The Federal Reserve (Fed) monitors productivity and labor costs for any signs that inflation could grow. Mild inflation has allowed the central bank to keep short-term interest rates at record lows and to buy bonds to keep long-term rates down, stimulating economic growth. Higher productivity allows companies to pay employees more without sparking inflation, but improved productivity also can slow hiring if it shows companies do not need more workers to increase output. Worker productivity is improving along with economic growth. Hiring has accelerated since the summer, and wages gradually are rising. However, productivity gains have slowed in the past three years after jumping in the aftermath of the recession. Productivity grew only 1.5 percent in 2012 and 0.5 percent in 2011. The modest gains followed stronger increases of 3.3 percent in 2010 and 3.2 percent in 2009.
