March 6, 2007 -- Unit labor costs surged by an annual pace of 6.6 percent in the closing months of 2006, while productivity rose by just 1.6 percent, the Labor Department reported Tuesday.

The revised gains in unit labor costs -- a measure of the amount paid to employees for a given unit of output -- were the highest since the first quarter of 2006, the report said. Between October and December last year, hourly wages adjusted for inflation rose by 10.5 percent, the report said.

Without corresponding gains in productivity to boost corporate profits, Federal Reserve officials are concerned that rising labor costs will get passed on to consumers in the form of higher prices.

On a year-to-year basis, productivity has slowed since 2002, the report said.

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