US worker productivity rose by a weaker-than-expected 0.2 percent in the third quarter, but unit labour costs grew less than initially thought in a sign of moderating inflation pressure, government data showed on Tuesday.
The data gave a brief lift to US government bond prices and the dollar weakened, as dealers bet the data would ease the central bank's inflation concerns and make rate cuts next year more likely.
"The bad news is that productivity growth is smaller than expected, but the good news is that unit labour costs were revised lower than expected," said Christopher Low, chief economist at FTN Financial in New York.
"It's important that the Fed is well aware that the economy is slowing, but they need to know that the slowdown is taking pressure off inflation. Hopefully this is what they will take from this report," he said.
Non-farm business productivity was forecast by analysts polled by Reuters to rise at a 0.4 percent annual rate. While it fell short of that mark, it was revised up from the flat reading initially reported by the Labour Department.
Productivity grew just 1.4 percent from the same quarter last year, the weakest year-on-year performance since the second quarter of 1997, when it expanded 1.3 percent.
Compensation per hour increased 2.6 percent, versus a 3.7 percent rise initially reported in the third quarter. The milder compensation gain combined with the upward revision in productivity to restrain unit labour cost growth to 2.3 percent, an increase well under forecasts for a 3.3 percent rise and the 3.8 percent gain first reported.
The Labour Department also announced it had revised down the year-on-year growth in unit labour costs to 2.9 percent in the third quarter from 5.3 percent, as it revised the second quarter's gain in unit labour costs down sharply.
This news will be welcomed by the US central bank as unit labour costs are seen as a gauge of inflation and profit pressures that interest rate policy-makers closely watch.
Fed officials worry that mounting labour costs may hinder a decline in inflation from levels they have said are too high, despite a slowdown in economic growth.
Fed policy-makers next meet on December 12 to review interest rates and investors think they will signal no change. But many also think will have to start cutting rates next year, in the face of a weakening economy.
Separately, employment consulting firm Challenger, Gray & Christmas Inc said on Tuesday planned US layoffs rose 11 percent in November to 76,773, led by job cuts in the automotive industry. In another report, the International Council of Shopping Centers and UBS Securities said US chain stores sales fell 2.6 percent last week but were up 3.1 percent from a year ago.
Comments
Comments are closed.