U.S. worker productivity increased at its fastest pace in two years in the third quarter, helping to curb growth in labor costs, but the trend remained weak.
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The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, rose at a 3.1 percent annual rate. The increase ended three straight quarters of decline.
Productivity fell at a revised 0.2 percent rate in the second quarter, which was previously reported as a 0.6 percent pace of decline. Economists polled by Reuters had forecast productivity rising at a 2.0 percent rate in the third quarter.
Productivity was unchanged compared to the third quarter of 2015.
The surge in third-quarter productivity was flagged by a report last week showing an acceleration in gross domestic product during the same period.
The economy grew at a 2.9 percent pace in the third quarter after expanding at a 1.4 percent rate in the April-June period.
Output per worker in the third quarter jumped at a 3.4 percent rate, also the fastest pace since the third quarter of 2014. That was up from the 1.6 percent pace notched in the April-June period.
The increase in output came despite total hours worked rising only at a 0.3 percent rate in the third quarter, slowing from a 1.7 percent pace of increase in the second quarter. That reflected a drop in hours for the self-employed.
Unit labor costs, the price of labor per single unit of output, rose at a 0.3 percent pace in the third quarter after increasing at a downwardly revised 3.9 percent rate in the second quarter.
Unit labor costs were previously reported to have increased at a 4.3 percent rate in the second quarter.
Third-quarter unit labor costs rose at a 2.3 percent rate compared to the same period of 2015. Hourly compensation per hour increased at a 3.4 percent rate in the third quarter after increasing at a 3.7 percent pace in the prior quarter. The strong quarterly increases suggest a pickup in wage growth. Hourly compensation rose at a 2.3 percent rate from a year ago.
(Reporting by Lucia Mutikani; Editing by Paul Simao)