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December 06, 2006
Revised Data on Productivity, Labor Costs Provide Better News for Firms

Productivity grew at an annual rate of 0.2 percent in the third quarter of 2006, according to a revised report by the U.S. Department of Labor's Bureau of Labor Statistics.

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In an initial report released in November, the bureau said productivity was flat in the third quarter of 2006.

The revised report showed output per hour rose 0.2 percent during the third quarter of 2006, reflecting a 2.3-percent increase in output and a 2.1-percent rise in hours of 2.3 percent.

From the third quarter of 2005 to the third quarter of 2006, productivity increased 1.4 percent, the smallest four-quarter gain in productivity since the second quarter of 1997 (1.3 percent).

In the second quarter of 2006, productivity had increased 1.2 percent as output grew 2.7 percent and hours increased 1.5 percent.

The revised report also showed that hourly compensation and labor costs increased at a slower pace than initially thought. Hourly compensation grew 2.6 percent in the third quarter of 2006, according to the revised report. The bureau's initial estimate in November had hourly compensation increasing 3.7 percent in the third quarter.

When the rise in consumer prices is taken into account, real hourly compensation declined 0.4 percent in the third quarter of 2006 and fell 5.9 percent one quarter earlier.

Unit labor costs rose 2.3 percent in the third quarter, much lower than the bureau's initial estimate of a 3.8-percent increase. In the second quarter of 2006, unit labor costs dropped 2.4 percent.

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