ABJ - November 8 - Nonfarm business sector labor productivity increased at a 3.1 per cent annual rate during the third quarter of 2011, the U.S. Bureau of Labor Statistics reports, with output and hours worked rising 3.8 per cent and 0.6 per cent, respectively.

From the third quarter of 2010 to the third quarter of 2011, output increased 2.5 per cent as hours rose 1.4 per cent, resulting in a 1.1 per cent increase in productivity.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in nonfarm businesses fell 2.4 per cent in the third quarter of 2011 as the 3.1 per cent increase in output per hour outpaced a 0.6 per cent rise in hourly compensation. Unit labor costs rose 1.2 per cent over the last four quarters, because the increase in hourly compensation was greater than the increase in output per hour.

The U.S. Bureau of Labor Statistics defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce unit labor costs.