U.S. non-farm productivity in the third quarter rose at its fastest pace in six years as companies squeezed more output from a smaller pool of labor and cut costs to deal with a slump in demand, government data showed on Thursday.

The Labor Department said non-farm productivity surged at a 9.5% annual rate, the quickest pace since the third quarter of 2003. Productivity grew at a 6.9% pace in the April-June period.

Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 6.4% rate in the third quarter.

Productivity in manufacturing rose at a record 13.6% rate in the third quarter.

Total non-farm output rebounded, growing at a 4% rate in the July-September quarter after dropping 1.1% in the previous period.

Productivity has increased sharply over the past two quarters, largely driven by aggressive cost cutting by businesses.

Analysts see little room for more cuts and believe that this, coupled with the economy's resumption of growth in the third quarter, may cause companies to start increasing payrolls.

The economy grew at a 3.5% annual pace in the July-September period, probably ending the worst U.S. recession since the Great Depression of the 1930s.

Hours worked fell at a 5% rate in the third quarter, the Labor Department said. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell 5.2% after declining 6.1% in the second quarter. Analysts had expected unit labor costs to fall 4% in the third quarter. Compensation per hour rose at a 3.8% pace and, adjusted for inflation, was up 0.2%.

Compared with the July-September quarter of 2008, non-farm productivity rose at a 4.3% rate. Unit labor costs fell 3.6% year-on-year.