By Shobhana Chandra
Nov. 6 (Bloomberg) -- U.S. worker efficiency probably rose in the third quarter at the slowest pace in more than a year as the economy slumped, economists said before a government report today.
Productivity, a measure of how much an employee produces for each hour of work, rose at a 0.7 percent annual pace from July through September after a 4.3 percent gain in the previous three months, according to the median estimate of 63 economists surveyed by Bloomberg News. Labor costs likely accelerated.
The figures, coming a day before the government's October payrolls report, signal companies may accelerate firings in an effort to trim expenses as the economy declines. A weakening labor market will keep wage pressures contained, reinforcing the Federal Reserve's forecast that inflation will moderate.
``The economy is getting weaker, and employment and compensation are coming down,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``Inflation is the least of our worries right now.''
The Labor Department's report is due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from a gain of 2 percent to a decline of 0.5 percent. Labor expenses probably rose at a 3 percent rate in the third quarter, after dropping 0.5 percent in the prior quarter, the survey showed.
Another report from Labor at 8:30 a.m. may show first-time claims for unemployment benefits were little changed at 477,000 last week, confirming the deterioration in the job market. The total number of people receiving jobless benefits is close to a five-year high.
Job Losses
Tomorrow's payrolls report is projected to show the economy lost an additional 200,000 jobs in October, according to the survey median, bringing the total decline in payrolls to almost 1 million so far this year.
Non-farm output last quarter dropped at a 1.7 percent pace, almost as much as the decline in hours worked, leading to the slowdown in productivity. The economy overall shrank at a 0.3 percent pace from July to September, the most since the 2001 recession.
Some economists are concerned that the productivity surge that began in 1996 is waning.
In the 1990s, former Fed Chairman Alan Greenspan was one of the first to recognize productivity was accelerating because of the increased use of computers and the Internet, and that the improvement would contain inflation even as the economy gained strength and unemployment stayed low. The realization allowed the Fed to keep interest rates little changed from 1996 to 1999.
Cutting Costs
Still, as sales slow, companies are redoubling efforts to protect profits by cutting staff and workers' hours to boost productivity and reduce expenses. Dell Inc., the world's second- largest personal-computer maker, this week said it is offering unpaid leave to workers and severance packages to employees who voluntarily quit their jobs.
Airlines are among the companies focused on lowering expenses as fuel costs remain elevated and consumers cut back on travel. AMR Corp.'s American Airlines has said it is shrinking U.S. routes for its main jet operations by as much as 12 percent as it parks more than 100 planes and trims the workforce by 8 percent, or about 6,840 jobs.
``Airlines are not generating enough revenue to cover their costs,'' AMR's Chief Executive Officer Gerard Arpey said in an interview this month. ``We're going to be very cautious about our capacity for next year.''
Bloomberg Survey
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Prod- Labor Initial
uctivity Costs Claims
QOQ% QOQ% ,000's
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Date of Release 11/06 11/06 11/06
Observation Period 2Q 2Q P Nov. 1
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Median 0.7% 3.0% 477
Average 0.7% 3.0% 477
High Forecast 2.0% 5.0% 491
Low Forecast -0.5% -2.0% 460
Number of Participants 63 60 39
Previous 4.3% -0.5% 479
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4CAST Ltd. 0.8% 3.7% 480
Action Economics -0.5% 4.0% 475
AIG Investments 0.5% 3.0% ---
Aletti Gestielle SGR 1.1% --- 483
Argus Research Corp. 0.3% 0.3% ---
Banc of America Securitie 0.1% 4.8% ---
Bank of Tokyo- Mitsubishi 0.7% 3.6% 476
Bantleon Bank AG 0.5% 3.5% ---
Barclays Capital 0.3% 4.6% 480
BMO Capital Markets 1.0% 2.5% 485
BNP Paribas 0.9% 2.7% 491
Briefing.com 1.0% --- 475
Calyon 0.3% 2.6% ---
Citi 0.3% 3.5% 470
ClearView Economics 0.0% 1.0% ---
Commerzbank AG 1.2% 2.5% 470
Credit Suisse 0.5% 3.9% 480
Daiwa Securities America 0.0% 4.0% ---
Danske Bank 0.4% 3.7% ---
DekaBank 1.4% 2.0% ---
Desjardins Group 0.8% 3.0% 481
Deutsche Bank Securities 1.0% 3.0% 480
Dresdner Kleinwort 0.2% 3.8% ---
DZ Bank 1.0% 3.0% ---
First Trust Advisors 0.4% 2.3% 477
Fortis 1.5% 2.3% ---
FTN Financial 1.2% 2.0% ---
Goldman, Sachs & Co. 0.5% 5.0% ---
H&R Block Financial Advis 1.0% 3.2% ---
Helaba 1.0% 2.5% ---
High Frequency Economics 0.8% 2.2% 479
HSBC Markets 1.0% --- 460
IDEAglobal 1.2% 2.3% 475
IHS Global Insight -0.2% 4.5% ---
Informa Global Markets 0.3% 3.0% 485
ING Financial Markets 0.9% 2.6% ---
Insight Economics 2.0% 2.0% 475
J.P. Morgan Chase 0.2% 4.2% 480
Janney Montgomery Scott L 0.7% 2.1% ---
JPMorgan Private Client 0.9% 2.8% 475
Lloyds TSB 1.8% 3.0% 475
Maria Fiorini Ramirez Inc 1.0% 2.5% 480
Merk Investments 0.1% 2.7% 485
Merrill Lynch 0.0% 4.4% 485
Moody's Economy.com 0.3% 3.8% 475
Morgan Stanley & Co. -0.2% 4.3% ---
National City Corporation 0.1% 4.4% ---
Natixis 0.5% 3.0% ---
Newedge 0.8% 2.9% ---
Nomura Securities Intl. 0.3% 4.7% ---
RBS Greenwich Capital 0.6% 3.4% 465
Ried, Thunberg & Co. -0.2% 4.2% 475
Schneider Trading Associa 1.0% 2.2% 467
Scotia Capital 1.5% --- 480
Standard Chartered --- --- 485
Stone & McCarthy Research --- 3.0% 475
TD Securities --- --- 475
Thomson Financial/IFR 1.8% -2.0% 470
UBS Securities LLC 0.3% 4.2% 480
Unicredit MIB 0.5% 2.8% 480
University of Maryland 0.8% 2.5% ---
Wachovia Corp. 1.5% 2.2% ---
Wells Fargo & Co. 1.0% 2.7% 475
WestLB AG 0.5% 3.0% ---
Westpac Banking Co. 0.8% -1.0% 480
Wrightson Associates -0.2% 4.2% 475
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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