U.S. worker productivity grew at the same modest rate this summer as in spring, a sign that companies may be nearing the limits on how much output they can get from their employees.
The Labor Department said Thursday that worker productivity increased at a modest 1.9 percent annual rate from July through September, matching the April-June quarter rate. Labor costs fell at a 0.1 percent rate after having risen at a 1.7 percent rate in the second quarter.
Productivity is the amount of output per hour of work. Weaker productivity can be a hopeful sign for job creation. It often means companies can't squeeze much more output from their staffs and must hire to meet demand.
Over the past year, productivity has risen just 1.5 percent. That's half the average growth that companies saw in 2009 and 2010, shortly after many laid off workers to cut costs during the Great Recession.
Economists predict worker productivity will slow for the rest of this year and through 2013. Higher productivity is typical during and after a recession, they note. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.
The economic recovery is showing some signs of improvement since the spring.
The economy grew at an annual rate of 2 percent in the July-September quarter, up from 1.3 percent growth in the April-June quarter. Consumers and the federal government spent more over the summer, and the housing market contributed to growth for the sixth straight quarter.
The unemployment rate dropped in September to 7.8 percent, the first time the rate has been below 8 percent since January 2009 — President Barack Obama's first month in office.
The government will release the October employment report on Friday. Economists forecast that the economy added 121,000 jobs last month, while the unemployment rate inched up to 7.9 percent.
The Federal Reserve closely follows changes in productivity and labor costs to monitor inflation pressures. With unemployment remaining elevated, economists do not expect wages to accelerate any time soon. Higher wages can lead to unwanted inflation.