Productivity surged in the third quarter at the fastest pace in six years while labor costs continued to drop sharply, a combination that will bolster companies' profits but continue to saddle workers with stagnant incomes.
The Labor Department says productivity, the amount of output per hour of work, was rising at an annual rate of 9.5 percent in the July-September quarter, much better than the 6.4 percent gain economists had expected. Unit labor costs fell at a 5.2 percent rate.
It is typical for productivity to soar in the early stages of an economic recovery as businesses continue to aggressively cut costs even as output rebounds. However, the concern is that the continued squeeze on workers' incomes will depress consumer spending in the months ahead, putting the economic recovery at risk.
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