US productivity accelerates in Q4

US worker productivity increased faster than expected in the fourth quarter, resulting in a moderation in labour costs growth.

Nonfarm productivity, which measures hourly output per worker, rose at a 3.0 per cent annualised rate last quarter, the Labor Department said on Thursday (Feb 2). Data for the third quarter was revised higher to show productivity growing at a 1.4 per cent rate, instead of the previously reported 0.8 per cent pace. Economists polled by Reuters had forecast productivity rising at a 2.4 per cent rate.

Productivity fell at a 1.5 per cent rate from a year ago and dropped 1.3 per cent in 2022. Large shifts in the composition of the workforce in the wake of the Covid-19 pandemic have made it harder to get a clear read on productivity.

Unit labour costs – the price of labour per single unit of output – increased at a 1.1 per cent rate after rising at a 2.0 per cent pace in the third quarter. Unit labour costs rose at a 4.5 per cent rate from a year ago. They surged 5.7 per cent in 2022, too fast to be consistent with the Federal Reserve’s 2 per cent inflation target.

The US central bank on Wednesday raised its policy rate by 25 basis points to a range of 4.50 per cent to 4.75 per cent, and promised “ongoing increases” in borrowing costs.

Hourly compensation increased at a 4.1 per cent pace. Compensation rose at a 3.4 per cent rate in the third quarter. It grew at a 3.0 per cent rate compared with the fourth quarter of 2021 and rose 4.4 per cent in 2022. REUTERS