U.S. worker productivity in the third quarter was better than expected on increased output, although workers put in fewer hours.

The productivity of nonfarm workers, measured as the output of goods and services per hour worked, increased at a 1.6% seasonally adjusted annual rate from July through September, the Labor Department said Thursday.

It was a slowdown from the upwardly revised 3.5% productivity gain in the second quarter, but the increase was well-above expectations — economists surveyed by The Wall Street Journal had forecast a 0.3% decrease from the prior quarter.

The latest productivity gain was a result of output increasing by 1.2% in the third quarter and hours worked falling at a 0.5% annualized pace.

The “report should allay fears of a weakening in productivity growth,” TD Securities strategist Millan Mulraine told the WSJ. “However, the fact that the rebound in productivity came on account of declining labor hours speaks to the softening in labor market activity.”

The decline in hours worked was a surprise, according to the WSJ. Data from a different report — the September jobs numbers — showed the number of hours Americans worked increased at faster than a 2% pace during the quarter. The hours-worked figure from the jobs report comes from a slightly narrower group of workers than the data produced by the Labor Department.

From a year earlier, productivity was up a mild 0.4% in the third quarter. Unit labor costs rose at a 1.4% annual rate in the third quarter, compared with a 1.8% decline in the second quarter.

Productivity in manufacturing rose at a 4.9% pace, the best increase in four years. The gain was led by improved efficiency in the production of long-lasting goods, including cars. Manufacturing output rose 2.7%, while hours worked declined 2.1%.

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