U.S. business productivity (search) surged in the third quarter, far outpacing Wall Street expectations, and slimmer compensation gains helped shrink labor costs, a government report showed on Thursday.

The Labor Department (search) said growth in non-farm productivity, or worker output per hour, grew at a 4.1 percent annual rate from July to September after an upwardly revised 2.1 percent second-quarter gain.

Wall Street (search) had expected productivity to increase at a 2.5 percent pace following a previously estimated 1.8 percent second-quarter advance.

Productivity gains affect how companies absorb rising costs like energy, and rising productivity allows companies to hold prices down.