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he Labor Department said Thursday that the productivity of U.S. workers grew at a 1.9% annual pace in the third quarter, the smallest gain since the fourth quarter of 2002.

Productivity, which is a measure of how much an employee produces for every hour of work, slowed from a revised 3.9% annual rate in the second quarter. Productivity rose at a 9% clip in the third quarter of 2003.

Tim McGee, chief economist at U.S. Trust Corp., told Bloomberg the drop in productivity was good news for job growth because in order to keep up with increased demand, companies will have to start hiring.

Unit labor costs, the amount paid for each unit of production, rose at a 1.6% annual rate. Labor said that was the fastest since the first quarter of 2003, but it was less than the 2.3% increase projected by economists, Bloomberg reported.

Productivity rose 3.1% in the 12 months ended in September, down from a 4.9% year-over-year increase in June.

Labor also said that productivity rose 4.4% the past two years, the first time since records began in 1947 that productivity growth exceeded 4% in consecutive years.