WASHINGTON (AP) — The Labor Department issues its second and final estimate of U.S. worker productivity and labor costs for the July-September quarter. The report will be released at 8:30 a.m. Eastern time Monday . SOLID INCREASE: Economists forecast that productivity rose at an annual rate of 2.8 percent, according to a survey by FactSet. That would be up from a previous estimate of 1.9 percent. It would also be the fastest pace in nearly two years and much stronger than the 1.8 percent rate in the April-June quarter. STRONGER GROWTH: Productivity is the amount of output per hour of work. It is expected to be much stronger than previously thought after the government said earlier this month that growth was much stronger in the July-September quarter than first estimated. The economy grew at 3.6 percent annual rate in the third quarter, much faster than 2.8 percent rate previously estimated. The increase suggests a sharp upward revision in worker productivity during the July-September quarter. When productivity increases, living standards improve because companies can pay employees more without sparking inflation. It also corresponds with stronger corporate profits. But more productivity can slow hiring. It reveals that companies are already generating gains with their existing labor force and don't need more employees. Labor costs fell in the third quarter, evidence that inflation will remain low. However, productivity growth has been mostly flat over the past year. That's because the gains from the past six months have been offset by declines in previous six months. Worker productivity is improving along with economic growth. Hiring has accelerated since the summer and wages are gradually rising. However, productivity gains have slowed in the past three years after jumping in the aftermath of the recession. Worker productivity grew just 1.5 percent in 2012 and 0.5 percent in 2011. Those gains followed much healthier increases of 3.3 percent in 2010 and 3.2 percent in 2009. But productivity improved because companies ramped up output after having laid off workers during the Great Recession. 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.
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