Productivity, which is output divided by hours, increased at a 9.5 percent annual rate in the third quarter, according to Department of Labor figures released Thursday. The rate compared with a second quarter increase of 6.8 percent.

The surge in nonfarm productivity was driven by U.S. companies increasing output while reducing working hours. Output increased at a 4 percent annual rate, while work hours decreased at a 5 percent annual rate.  The increase in productivity beat prediction of economists surveyed by Bloomberg LP, who forecasted productivity would rise at a 6.5 percent annual rate.

Dean M. Maki, chief U.S. economist at Barclays Capital Inc., said the high spike in productivity highlights an unsustainable situation.  

“We could never sustain this [high productivity rate] for too long,” he said. “We need to have stronger employment levels to sustain growth.” As the economy expands, as it did in Q3 with an increase of 3.5 percent, employment levels will pick up, he added.  

David Sloan, a senior economist at 4Cast Inc, said the high productivity numbers, driven by a large increase in output with a much larger drop in hours, benefited companies at the cost of workers.  

“This explains why companies’ profits beat expectations for the third quarter, but most of that gain comes from cost cutting.”

Peter D’antonio, an economist at Citibank NA, said it won’t be long until companies start hiring more workers.  

“As companies profit get back in shape as we’ve seen they will be in a better position to hire more workers,” he said. “And we’ll also start to get sustainable increases in the payroll.”

Unit labor costs dropped at a 5.2 percent annual rate in the quarter while real hourly compensation increased only at a 0.2 percent annual rate.

D’antonio said the spike in productivity was greatly driven by the bounce-back of the auto industry. In manufacturing, the gains were impressive, with productivity surging at a 13.6 percent annual rate and unit labor costs in manufacturing falling 7.1 percent.