(MENAFN) Labor costs rose less than expected, but weak productivity kept inflationary pressures going in the third quarter, according to Labor Department statistics released Thursday.
Unit labor expenditure, a measure of productivity relative to wages, rose 3.5% from July to September, below the Dow Jones forecast of 4% and down from the 8, 9% from the previous quarter.
However, productivity grew at an annualized rate of 0.3%, below expectations of 0.4%, reflecting mounting price pressures that have kept inflation near 40-year highs.
In an effort to rein in rising prices, the Federal Reserve on Wednesday raised interest rates for the sixth time this year, raising its benchmark short-term borrowing rate to a target range of 3.75% to 4 %. Fed Chairman Jerome Powell said wage pressures are not a big driver of inflation, but the current rate is not consistent with the Fed’s 2% inflation target.
“In such a high inflation environment, productivity growth could play a critical role in easing cost pressures and protecting businesses against rising payrolls,” said Lydia Boussour, senior economist at EY Parthenon. “But today’s report indicates that companies still cannot rely on productivity gains to mitigate the effects of high inflation on their bottom line.”
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