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US productivity grinds to a halt US productivity grinds to a halt
(4 days later)
US labour productivity growth was at a standstill in the three months to the end of September, the latest indication that the American economy is slowing.US labour productivity growth was at a standstill in the three months to the end of September, the latest indication that the American economy is slowing.
With analysts expecting productivity to grow 1.1% in the third quarter, the zero growth rate from the Labor Department came as a surprise.With analysts expecting productivity to grow 1.1% in the third quarter, the zero growth rate from the Labor Department came as a surprise.
Unit labour costs were up 5.3% from the same period in 2005, the worst annual rise in 24 years.Unit labour costs were up 5.3% from the same period in 2005, the worst annual rise in 24 years.
The figures will increase inflation fears at the US Federal Reserve.The figures will increase inflation fears at the US Federal Reserve.
'Growing concern''Growing concern'
"Both the productivity and labour costs were pretty weak numbers and it adds to growing concern that economically speaking things aren't looking all that wonderful," said Collins Stewart analyst Michael Panzner."Both the productivity and labour costs were pretty weak numbers and it adds to growing concern that economically speaking things aren't looking all that wonderful," said Collins Stewart analyst Michael Panzner.
"The combination could lead at least some investors to start talking stagflation.""The combination could lead at least some investors to start talking stagflation."
The Labor Department measures productivity as the amount of output per hour of work.The Labor Department measures productivity as the amount of output per hour of work.
Its latest figures come just a day after separate data showed that the US manufacturing sector grew at its slowest pace for three years in October.Its latest figures come just a day after separate data showed that the US manufacturing sector grew at its slowest pace for three years in October.
Taken together, the figures give the Federal Reserve much to think about when it next meets to set interest rates in December.Taken together, the figures give the Federal Reserve much to think about when it next meets to set interest rates in December.
While the increased labour cost figure suggests a rate rise might be necessary to control inflation, the weakening manufacturing sector could benefit from a cut.While the increased labour cost figure suggests a rate rise might be necessary to control inflation, the weakening manufacturing sector could benefit from a cut.
Analysts expect the Fed will keep rates on hold at 5.25% for the fourth consecutive time.Analysts expect the Fed will keep rates on hold at 5.25% for the fourth consecutive time.