Third-Quarter Productivity Increases at 9.4% Annual Rate

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.S. worker productivity grew at a 9.4% annual rate in the third quarter, the most since the second quarter of 1983, the Labor Department reported Wednesday.

The index, which gauges the work performed by one employee in an hour, was revised from an earlier estimate of 8.1% growth.

Among manufacturers, productivity rose at a 9% pace after rising at a revised 2.8% rate in the second quarter.

For the economy's long-term health, productivity gains are vital, Reuters said. They allow the economy to grow faster without triggering inflation and allow companies to boost profitability because they can pay workers more without raising prices.

As profits improve, companies may be more willing to boost capital investment and hiring — two crucial ingredients to the economy's sustained recovery, Reuters said.

Productivity grew at a 7% rate in the second quarter of this year. From 1996-2000, during the record expansion, productivity increases averaged 2.5% a year, Bloomberg said.

In the third quarter, total output increased at a 10.3% rate, the most since the third quarter of 1983, compared with a 4.6% gain in the previous three months.

Unit labor costs, the amount paid for each unit of production, fell at a 5.8% annual rate last quarter, after a 3.2% drop. The last time labor costs fell more was a 6.5% decline in the second quarter of 1983.

In the 12 months that ended with September, productivity rose 5%.

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