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US productivity falls sharply in fourth quarter
[WASHINGTON] US nonfarm productivity fell in the fourth quarter at its fastest pace in more than a year, leading to a jump in labour-related production costs.
The Labour Department said on Thursday that productivity, which measures hourly output per worker, declined at a 3.0 per cent annual rate, the biggest drop since the first quarter of 2014. Productivity rose by a downwardly revised 2.1 per cent rate in the third quarter.
Economists polled by Reuters had forecast productivity falling at only a 1.8 per cent rate last quarter after expanding at a previously reported 2.2 per cent pace in the third quarter.
The weak productivity reflects a sharp slowdown in gross domestic product growth during the quarter and an acceleration in the pace of hiring. Economic growth slowed to a 0.7 per cent rate in the final three months of 2015, while nonfarm payrolls rose by an average 284,000 jobs per month.
Productivity grew 0.6 per cent in 2015, the smallest increase since 2013. Productivity increased at an annual rate of less than 1.0 per cent in each of the last five years. The average annual rate of productivity growth from 2007 to 2015 is 1.2 per cent, well below the long-term rate of 2.1 per cent from 1947 to 2015.
Economists blame softer productivity on a lack of investment, which they say has led to an unprecedented decline in capital intensity.
While weak productivity has boosted employment growth as companies hire more workers to increase output, economists say it has contributed to stagnant wages and lowered the economy's speed limit.
In the fourth quarter, hours worked increased at a 3.3 per cent rate. Unit labour costs, the price of labour per single unit of output, advanced at a 4.5 per cent pace, the fastest rate in a year.
Unit labour costs increased at a 1.9 per cent rate in the third quarter and rose 2.4 per cent in 2015, the largest gain since 2007.
Compensation per hour increased at a 1.3 per cent rate in the fourth quarter after rising at a 4.1 per cent rate in the third quarter. Compensation increased 3.0 per cent in 2015, also the largest increase since 2007.