U.S. worker productivity increased faster than expected in the fourth quarter, resulting in a moderation in labor costs growth.
Nonfarm productivity, which measures hourly output per worker, rose at a 3.0% annualized rate last quarter, the Labor Department said Thursday. Data for the third quarter was revised higher to show productivity growing at a 1.4% rate instead of the previously reported 0.8% pace. Economists polled by Reuters had forecast productivity rising at a 2.4% rate.
Productivity fell at a 1.5% rate from a year ago and dropped 1.3% 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 of productivity.
Unit labor costs - the price of labor per single unit of output - increased at a 1.1% rate after rising at a 2.0% pace in the third quarter. Unit labor costs rose at a 4.5% rate from a year ago. They surged 5.7% in 2022, too fast to be consistent with the Federal Reserve's 2% inflation target.
The U.S. central bank on Wednesday raised its policy rate by 25 basis points to a range of 4.50% to 4.75%, and promised "ongoing increases" in borrowing costs.
Hourly compensation increased at a 4.1% pace. Compensation rose at 3.4% rate in the third quarter. It grew at a 3.0% rate compared to the fourth quarter of 2021 and rose 4.4% in 2022.
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