US productivity in surprise spurt

US productivity grew at a better-than -expected annual rate of 3.6% in the first quarter of 2010, figures show.

Separate figures also showed that applications for jobless benefits dropped for a third week in a row.

The US economy has been growing since last summer, but firms have been reluctant to take workers back on.

Instead they are pushing smaller workforces to produce more, which has increased productivity - measured as the amount of output per hour of work.

The combination of better productivity and lower wage costs is good for firms' profits, but is bad for household incomes.

That lack of household spending power could in turn be bad for the overall US economy, where consumer spending accounts for two-thirds of economic activity.

For all of 2009, productivity rose at a rate of 3.7%, compared with a 2% increase in 2008. It was the fastest annual increase in productivity in seven years.

On Friday, the April unemployment figures will be released and are expected to show the unemployment rate remaining at 9.7% for a fourth month in a row.