US business productivity grew at a greater-than-expected 1.7 per cent annual rate in the first quarter, helping to hold labour costs to a slim gain.
In a sign of a solid labour market, another report showed today a surprising drop in unemployment claims.
Analysts were expecting business productivity, a measure of how much any given worker can produce in an hour, to rise by 1 per cent in the first quarter.
Productivity advanced at a 2.1 per cent annualised pace in the fourth quarter of last year, revised up from the previously reported 1.6 per cent gain.
Unit labour costs grew at a 0.6 per cent annual rate in the first three months of the year, well below the 4 per cent rise analysts were expecting. Unit labour costs are the labour cost associated with any given unit of production and a key gauge of profit and inflation pressures.
It was the smallest advance in labor costs since a decline of 2.5 per cent in the second quarter of 2006.
US Treasury debt prices pared gains and the dollar and US stock futures rose on the reports as traders focused on the decline in claims for jobless benefits, which came a day before the government's April payrolls report.
Treasury losses were limited by the data showing a much smaller-than-expected gain in unit labour costs in the first quarter.
The rise in unit labour costs in the first quarter was much slower than the 6.2 per cent annualised increase in the fourth quarter of 2006, which was originally reported as a 6.6 per cent gain.
The slim gain in unit labour costs also reflected a sharp slowdown in hourly compensation growth, which expanded at an annualized 2.3 per cent rate after a revised 8.5 per cent pace in the fourth quarter.
A 1.3 per cent year-on-year annualised gain in unit labour costs in the first quarter was the smallest since the second quarter of 2004. Meanwhile, hourly compensation, which includes benefits, rose at a 2.4 per cent pace, the slowest since the second quarter of 1995.