Productivity in the nonfarm business sector increased at a 6.3% annual rate in the quarter, the government said in its second estimate of productivity. A month ago, the government said productivity rose 4.9% annualized.Unit labor costs, a key gauge of inflationary pressures from wages, were revised much lower, showing a 2% annual decline in the third quarter compared with a 0.2% drop estimated a month ago.
Unit labor costs in the second quarter were also revised much lower, from a 2.2% gain to a 1.1% decline, reflecting more up-to-date compensation information.
This is important because higher productivity gives the Federal Reserve more room to cut interest rates. MarketWatch writes, "High productivity growth means the economy can grow rapidly without inflation, raising living standards and theoretically allowing workers to get big raises without hurting the boss's profits." I'm sure today's report will have a major impact at the Fed's meeting next week.
