Hooper said a weak manufacturing sector, along with U.S. dollar strength and low oil prices, suggest the Fed can increase rates slowly next year. He told CNBC he is also looking for signs that businesses will ramp up capital spending, noting that low capital expenditures have been at the core of "dismal" productivity.
The Fed is now widely expected to raise interest rates for the first time in more than nine years at its December meeting. Central bankers have held U.S. benchmark fed funds rates at near zero percent since December 2008.
In the absence of productivity gains, employers may have to hire more workers, so the unemployment rate could fall faster than the Fed expects, Hooper said. That would introduce some pressure to hike rates despite a relatively sluggish economy, he said.
JPMorgan Chase Chief Economist Bruce Kasman said he believes the potential growth rate for the U.S. economy is 1.5 percent and that the economy cannot grow more than that 1.5 percent without a continued tightening of labor markets.
"Labor markets are starting to get tight and we're sitting here with zero-policy rates," he told "Squawk Box."
"I think the the surprise for the Fed next year is going to be the dynamics of the unemployment rate moving down to 4.5 percent, maybe lower."
David Zervos, chief market strategist at Jefferies, said the European Central Bank monetary policy meeting on Thursday will have implications for the Fed's rate hike pace next year.