Washington – Growth in worker productivity slowed sharply in the summer while wages and benefits rose at a rate that was far below a previous estimate, a development likely to ease inflation worries at the Federal Reserve.
Productivity edged up at a 0.2 percent annual rate in the July- September quarter, the Commerce Department said Tuesday. A zero change was reported a month ago.
Wages and benefits per unit of output increased at an annual rate of 2.3 percent in the third quarter, much slower than the 3.8 percent advance previously estimated.
Analysts said the downward revision should ease fears at the Fed that wage pressures were threatening to send inflation sharply higher.
“Based on these numbers, the Fed can rest easy about the threat of inflation,” said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm. “The only debate now seems to be about when the Fed will cut” interest rates.
Behravesh said if inflation remains benign and the overall economy continues to show weakness, the central bank might move as soon as March to start cutting rates.
After raising rates for two years to make sure inflation did not get out of hand, the Federal Reserve has left them unchanged since the summer with analysts expecting the Fed to remain on hold next week at its last meeting of the year.
In other economic news, the Commerce Department said orders to U.S. factories plunged 4.7 percent in October, the third decline in the past four months and the biggest drop in more than six years. The manufacturing sector is starting to experience the adverse impact from this year’s slowdown in the overall economy, with auto sales and home construction suffering.
Orders for durable goods, items expected to last at least three years, dropped 8.2 percent, a figure originally reported last week as an 8.3 percent decline.
