US business productivity slowed sharply in the third quarter to a 1.9 per cent annual rate, but was still faster than expected, a preliminary government report showed today.
Unit labour costs grew at modest 1.6 per cent pace, while growth in non-farm business productivity, or worker output per hour, was the slowest since the fourth quarter of 2002.
The moderation in worker efficiency will be good news for the country's sluggish labour market if companies have to increase hiring to maintain output growth.
Wall Street analysts had expected productivity to slow to a 1.6 per cent rate from a sharply revised 3.9 per cent clip in the second quarter. That quarter had initially been reported with a 2.5 per cent growth rate.
The faster pace of growth in labour costs compared with a revised 1 per cent clip between April and June that had initially been posted as a 1.8 per cent rate.
This could indicate limited inflationary pressure from wages that may help the Federal Reserve keep to a measured pace of interest rate rises.
US firms have lifted output without hiring many new staff, boosting profits as the economy picked up steam but doing little to reduce unemployment.
Hours worked grew at a rate of 2.1 per cent in the third quarter, the fastest increase since the third quarter of 1999, as companies ran operations for longer to maintain output growth.
Analysts say weaker productivity may point to stronger jobs numbers ahead.
The October employment report, due out on Friday, is expected to show 169,000 new jobs compared with 96,000 in September - thanks in part to hurricane clean-up hiring.
Productivity growth was also substantially lower compared with the third quarter a year ago, when it rose by 9 per cent .
But officials have predicted it would moderate and still see it consistent with underlying US growth potential - the speed the economy can grow without hitting inflationary speed bumps - of 3.5 to 4 per cent .