Washington, Dec. 4 (Bloomberg) -- The productivity of U.S. workers probably surged in the third quarter as the economy expanded and companies kept payrolls lean, economists said ahead of a revised government report scheduled for today. The measure of how much Americans produce in an hour of work probably rose at a 5 percent annual rate from July through September, based on the median of 52 forecasts in a Bloomberg News survey. That would be up from last month's estimate of 4 percent and compares with a 1.7 percent pace in the second quarter, when economic growth slowed. Investment in new computers and software in the late 1990s is paying dividends by helping businesses produce more with fewer workers. The efficiency gains are helping underpin profits and wages. Federal-Mogul Corp., an auto-parts maker, narrowed its third-quarter loss as the company benefited from higher sales and more efficient operations.
Productivity gains ``are at the core of rising living standards,'' said Douglas Porter, a senior economist at BMO Nesbitt Burns Inc. in Toronto. ``Either corporate profits will be a lot better or companies will be able to afford to pay their workers more or a combination of both.'' The Labor Department releases the report at 8:30 a.m. Washington time. Also today, the Commerce Department will likely report that factory orders rose 1.7 percent in October after falling the two previous months, according to the median of 57 forecasts. The Institute for Supply Management will probably report the 10th consecutive month of growth in the service economy. The manufacturing and service reports are set for 10 a.m. Washington time.
Labor Costs
Unit labor costs, the amount paid to workers for each unit of production, was probably unchanged in the third quarter compared with last month's estimated 0.8 percent gain and a 2.2 percent increase from April to June. Since the mid-1990s, productivity has averaged 2.6 percent compared with a 1.4 percent annual increase from 1976 through 1995. Higher productivity lowers the cost of doing business and lets the economy grow faster than once thought possible without sparking inflation. Federal Reserve policy makers are optimistic there are still benefits to be derived from increases in productivity, which will help the economy weather the current period of slow growth. Efficiency gains from investments in new technology are ``likely not yet completed,'' said Fed Chairman Alan Greenspan in testimony before Congress last month. Central bankers said low interest rates ``coupled with still- robust underlying growth in productivity, is providing important ongoing support to economic activity,'' when they announced on Nov. 4 their decision to lower their target benchmark interest rate by half a percentage point. At 1.25 percent, the rate is the lowest since 1961//www.quote.bloomberg.com