-->Productivity rose to a much stronger-than-expected 4.1% rate in the third quarter, up from 2.1% in the second quarter. The improvement was centered in hours worked, which grew much more slowly at 0.1% compared against a 2.2% rate in the prior quarter. Growth in non-farm output was a bit slower in the quarter, though still at a strong 4.2% rate.

The rise in productivity sent unit labor costs lower, down 0.5% vs. a 1.8% rise in the second quarter. The yearlong trend of slowing productivity growth had put upward pressure on wages. Today's report indicates a lessened risk of wage-push inflation -- a big plus for the bond market and a relief to Federal Reserve policy makers who have been raising rates in an effort to head off inflation, the most severe manifestation of which is in wages.

Year-on-year rates shows productivity up 3.0% in the quarter compared with 2.3% in the second quarter. Labor costs were up 2.7% compared with 4.1% -- this is a headline number for the report. Note that the Bureau of Labor Statistics said it could not break out hurricane effects.

Real compensation (adjusted for inflation) fell 1.4% in the month after slipping 0.1% in the second quarter. Declining compensation may be good for inflation and perhaps even for corporate profits (at least short term), but it is a negative for consumer spending and ultimately for total economic growth.