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Ahead of the Bell: US Productivity

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November 14, 2013 06:31 AM EST | AP

WASHINGTON (AP) — The Labor Department reports on changes in U.S. worker productivity and labor costs for the July-September quarter. The report will be released at 8:30 a.m. EST.

MODEST INCREASE: Economists forecast that U.S. worker productivity grew at a 1.4 percent annual rate in the third quarter, according to a survey by FactSet. That would be below the solid 2.3 percent gain in the April-June quarter, but better than the first three months of the year when productivity declined.

UNEVEN PRODUCTIVITY: Worker productivity has improved in recent months because economic growth has accelerated. The economy expanded at a 2.8 percent annual rate in the third quarter, up from 2.5 percent growth in the previous quarter. At the same time, hiring has been only modest.

Productivity measures the amount of output per hour worked. In the long run, greater productivity enables companies to pay workers more without spurring inflation.

Weak productivity can be a signal that companies may have to hire because they can't squeeze more work from their existing employees. But that also depends greatly on growing demand for their products.

Productivity growth has been weak in recent years. It rose just 1.5 percent in 2012 and 0.5 percent in 2011. In records dating back to 1947, it has been growing by about 2 percent per year.

The productivity report also shows that labor costs have barely increased in recent months.

The Federal Reserve monitors productivity and labor costs for any signs that inflation could pick up. Mild inflation has allowed the Fed to keep short-term interest rates at record lows and to buy bonds to try to keep long-term rates down.