Dados EUA (13:30) - U.S. business productivity surges

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U.S. business productivity surges

Productivity in 3Q beats expectations climbing at pace of 4.1 percent; unit labor costs decline.

November 3, 2005: 9:31 AM EST

WASHINGTON (Reuters) - U.S. business productivity surged in the third quarter, far outpacing Wall Street forecasts, and an unexpected decline in labor costs helped ease inflation worries.

Non-farm productivity, or worker output per hour, grew at a 4.1 percent annual rate from July to September and second-quarter gains were revised higher to 2.1 percent, the Labor Department said in a report Thursday.

Wall Street had expected productivity to rise at a 2.5 percent pace after a previously estimated 1.8 percent second-quarter advance.

The gain in productivity "reinforces confidence that the underlying sustainable rate of increase in productivity is solidly 2.5 percent or more and that has been the premise of the Fed's willingness to raise rates in only a measured, moderate way," said Pierre Ellis, senior economist, Decision Economics in New York.

Stock futures rose after the report, pointing to a higher start on Wall Street, and Treasury bond prices hovered near unchanged, leaving the 10-year note yield at about 4.61 percent.

Unit labor costs -- a key profit pressure gauge -- also defied analyst expectations by declining at an annual rate of 0.5 percent in the third quarter.

Economists, which had forecast a 2 percent gain in unit labor costs, said the report could ease worries at the Federal Reserve about creeping inflation.

"Come the Fed meetings around April, May, June next year, this may have an impact," said Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston.

"If unit labor costs are not increasing as much as we initially expected, that would get the Fed to pause (rate hikes) sooner than expected," Mazanec said.

The Fed watches productivity data for signs of how companies cope with rising costs, including expensive energy. Rising productivity and low labor costs gives companies a chance to hold prices down.

Slowing compensation gains in the third quarter underpinned the weaker unit labor costs.

Compensation rose 3.6 percent in the July to September period, slowing from a 4 percent advance in the second quarter. After adjustment for inflation, hourly compensation declined 1.4 percent in the third quarter.

Hours worked held nearly steady, rising at a 0.1 percent annual rate in the third quarter.

In a separate report, the Labor Department said new claims for U.S. unemployment benefits fell for a third week as the toll from hurricanes Katrina and Rita continued to wane.

First-time claims for state unemployment benefits fell to a seasonally adjusted 323,000 in the week ended Oct. 29 from an upwardly revised 331,000 in the prior week. Wall Street had expected claims to nudge up to 330,000 from an originally reported 328,000.

The four-week moving average of claims, considered a clearer signal of the U.S. labor market because it flattens weekly volatility, declined for a fourth straight week to 350,500 from an upwardly revised 367,500 the prior week.