By Jeannine Aversa
The Associated Press
WASHINGTON - The productivity of America's workers soared by the largest amount in 20 years last quarter, raising hopes that the economic recovery is taking hold and businesses will soon be stepping up hiring.
The Labor Department reported Wednesday that productivity - the amount an employee produces each hour of work - rocketed at an annual rate of 9.4 percent in the July-to-September quarter, the best showing since the second quarter of 1983.
The figure, revised from a month ago based on more complete data, was even stronger than the government's first estimate of an impressive 8.1 percent productivity growth rate and represented an acceleration from the brisk 7 percent pace in the second quarter.
"The gains in productivity are helping companies' bottom lines so they can be less focused on cutting costs and more focused on expanding business and ultimately hiring more employees," said Lynn Reaser, chief economist at Bank of America Capital Management. "This is very good news for the sustainability of the recovery."
For the economy's long-term health and for rising living standards, productivity gains are vital. They allow the economy to grow faster without triggering inflation. Companies can pay workers more without raising prices, which would eat up those wage gains. And, productivity can bolster a company's profitability.
That's particularly important in the current economic climate. As profits improve, companies may be more willing to boost capital investment and hiring - two crucial ingredients for the recovery to be lasting.
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