U.S. productivity growth nearly doubled during the third quarter of 2005. The U.S. Labor Department said today that non-farm business productivity grew at a seasonally adjusted annual rate of 4.1% from July through September, the biggest quarterly increase in more than a year.

The increase follows a revised 2.1% increase in the second quarter. Economists had expected productivity to rise by 2.7% in the third quarter.

Workers produced more per hour even as hours fell by 0.4%. Unit labor costs unexpectedly fell by 0.5% after a 1.8% gain in the second quarter.

The decline in labor costs suggests that inflation remains contained.

The report showed that manufacturers of durable goods enjoyed the biggest productivity gains during the quarter. Labor productivity among such companies increased 7.5% while productivity in the manufacturing sector overall rose by 4.5%.

In a separate report released today, the U.S. Labor Department reported that first-time claims for unemployment insurance unexpectedly fell by 8,000 to 323,000 in the week ended October 29. The four week moving average fell by 17,000 to 350,500, which is in the range that economists associate with an improving labor market.