LABOR COSTS RISING GOLD FLYING

U.S. First-Qtr Productivity Rises at 2.9% Rate; Costs Rise 3.3%

June 2 (Bloomberg) -- The productivity of U.S. workers grew in the first quarter at the fastest pace in nine months and labor costs rose more than forecast, suggesting the Federal Reserve still has work to do to keep inflation from accelerating.

Productivity, a measure of how much an employee produces for every hour of work, rose at a 2.9 percent annual rate compared with a 2.3 percent increase the previous three months, the Labor Department said today in Washington. Labor costs rose at a 3.3 percent annual rate after a 7.7 percent fourth-quarter gain.

The first-quarter increase in wages and other labor costs was more than the median 2.1 percent forecast in a Bloomberg News survey. The year-over-year increase of 4.3 percent was the most since the third quarter of 2000. Rising labor costs are likely to keep Fed policy makers raising the benchmark interest rate to limit inflation, economists said.

The statistics are ``certain to reinforce Federal Reserve concerns regarding a potential build-up of underlying inflation pressures,'' said David Greenlaw, chief U.S. fixed income economist at Morgan Stanley in New York, before the report.

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