U.S. companies and workers were more productive in the third quarter than initially reported, but labor costs fell sharply for the second straight time in a sign that wages continue to lag behind. Productivity grew at a revised 2.3% annual pace instead of 2%, newly revised government figures show. The increase in output of goods and services was raised to 4.9% from 4.4%. Hours worked was revised up to 2.5% from 2.3%, according to Labor Department recalculations. Yet unit-labor costs fell 1% instead of rising 0.3%. And labor costs for the second quarter were revised to show a 3.7% plunge - a much larger decline than the previously reported 0.5% drop. Hourly compensation increased 1.3% in the third quarter, down from an initial estimate of 2.3%, with inflation-adjusted compensation rising a scant 0.2%. The slow growth in wages - a persistent trend since the recession ended more than five years ago - helps explain the slow recovery. But subdued labor costs also keep inflation under wraps and give the Federal Reserve more leeway to keep interest rates low for an extended period. In the second quarter, the increase in productivity was unchanged at 2.9%.
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