U.S. worker productivity rebounds in fourth quarter; labor costs tepid
WASHINGTON (Reuters) – U.S. worker productivity rebounded more than expected in the fourth quarter, curbing labor costs growth, but the coronavirus pandemic has distorted the data and prevented a clear trend.
The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, increased at a 6.6% annualized rate last quarter. Data for the third quarter was revised up to show productivity declining at a 5.0% rate instead of the previously reported 5.2% pace.
Economists polled by Reuters had expected productivity would rebound at a 3.2% rate. Productivity has been volatile since the pandemic started in the United States three years ago.
Compared to the fourth quarter of 2020, productivity grew at a 2.0% pace. Productivity increased at a 1.9% rate in 2021, slowing the 2.4% growth logged in 2020.
Hours worked rose at a 2.4% rate last quarter, pulling back from the 7.3% growth pace in the October-December period.
Unit labor costs – the price of labor per single unit of output – advanced at a 0.3% rate. They surged at a 9.3% pace in the third quarter. Unit labor costs rose at a 3.1% rate from a year ago. They grew 3.3% in 2021 after increasing 4.5% in 2020.
Last quarter’s tepid rise likely does not offer an accurate picture of labor costs for businesses.
The government reported last week that the Employment Cost Index, the broadest measure of labor costs, rose 1.0% in the fourth quarter after increasing 1.3% in the July-September period. Labor costs surged 4.0% on a year-on-year basis, the largest rise since the fourth quarter of 2001.
Thursday’s productivity report also showed hourly compensation surging at a 6.9% rate last quarter. That followed a 3.9% growth pace in the third quarter. Compensation increased at a 5.1% rate compared to the fourth quarter of 2020. It increased 5.2% in 2021 after rising 7.0% in 2020.
(Reporting by Lucia Mutikani; Editing by Paul Simao)