US worker productivity surged in the second quarter at more than twice the first-quarter clip, the government said, boosting hopes for stronger economic growth to generate more jobs.
The Labour Department said productivity, a gauge of how much a worker produces per hour, accelerated to a 5.7 per cent annual rate, more than twice the first quarter's 2.1 per cent gain.
Although strong productivity growth has actually been one culprit behind the job market's woes as wary executives extract more from existing workforces, economists hope it will ultimately foster profit improvements and encourage hiring.
In a separate report, Labor said new claims for jobless benefits remained below the 400,000 level for a third straight week during the August 2 week at 390,000 - the lowest level since 378,000 were filed in the February 8 week.
Analysts said the figures supported the likelihood of a pickup in economic growth during the second half, but cautioned against expecting a sudden upswing in hiring.
"It is interesting that we got the one-two punch: a report that shows very little rehiring, and a report that shows why - companies don't need new labor when they can squeeze every last bit of productivity out of the operations they are already running," said economist Lara Rhame of Brown Bothers Harriman in New York.
Financial markets responded cautiously to the data. The Dow Jones Industrial Average managed a 64.71-point gain to end at 9,126.45 but the high tech-laden Nasdaq composite index stalled, down less than a point to a 1,652.18-point close.
Bond prices rose by the end of the day, but in reaction to a successful completion of huge government debt sales to finance its burgeoning deficit rather than the economic data. The price of he bellwether 10-year US Treasury note was up 12/32s of a point to yield 4.22 per cent.
Economist Joel Naroff of Naroff Economic Advisers in Holland, Pennsylvania, said it appeared businesses were on the way to boosting earnings and output but it will take time to assess.
"With earnings beginning to improve, the next logical step is for hiring to start picking up," Mr Naroff said, adding: "We should see that in the next few months."
So far, the recovery from recession in 2001 has not generated new jobs, with growth too slow to prompt business to invest or hire. There have been more reports of companies shedding workers and shifting jobs out of the United States to cheap-labour countries like India than of new hiring.
Consumers, by contrast, have so far held up their end of the economic bargain by shopping heavily, though there are questions how long the spending boom can continue.
A possible warning-signal came on Thursday from the Federal Reserve, which reported consumer installment credit shrank by $400 million in June, the first decline since November 2002. The main reason was less use of charge and credit-card debt to finance purchases, the Fed said.
The Fed report did not investigate why consumers resorted less to credit. Analysts noted it could be anything from reduced optimism in the face of high unemployment to simply using money from mortgage refinancings to pay off credit cards that impose punishing interest charges on unpaid balances.
The Commerce Department separately said June wholesale sales climbed by 1.5 per cent, the healthiest monthly gain since a 1.6 per cent increase in April 2002. New cars, electrical equipment and gasoline sales all rose from May.
Analysts said national unemployment - which hit a nine-year high of 6.4 per cent in June before easing to 6.2 per cent in July - may be headed down.
"I think this latest report on state jobless claims is consistent with a mildly improving US labour market and it very much supports the notion that the unemployment rate perhaps peaked for the cycle at 6.4 per cent in June," said Moody's Investors Service economist John Lonski in New York.
The productivity report highlighted that companies have learned to stay lean and mean as they try to boost profits by operating with minimal new hiring in a business environment where it is hard to make price rises stick.
Unit labour costs, monitored as a sign of potential wage pressure, declined at a 2.1 per cent rate during the second quarter after rising two per cent in the first quarter this year.