Feb. 7, 2007 -- Labor costs grew at a slower pace at the end of 2006, but rose by a six-year high over the year as a whole, the Labor Department reported Wednesday.

In the fourth quarter, labor costs rose by 1.7 percent, following a 3.2 percent increase the previous quarter, while hours worked rose 1.2 percent and output by 4.2 percent, the report said.

Those gains helped boost productivity over the quarter by 3 percent, the report said.

On the year, unit labor costs rose 3.2 percent, the sharpest increase since 2000, while productivity was up 2.1 percent, the report said.

Labor costs, a closely-watched gauge of inflation, account for up to two-thirds of overall business costs.

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