US Worker Productivity Rebounds in Fourth Quarter; Labor Costs Tepid

By Reuters
Reuters
Reuters
February 4, 2022 Updated: February 4, 2022

WASHINGTON—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 percent annualized rate last quarter. Data for the third quarter was revised up to show productivity declining at a 5.0 percent rate instead of the previously reported 5.2 percent pace.

Economists polled by Reuters had expected productivity would rebound at a 3.2 percent 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 percent pace. Productivity increased at a 1.9 percent rate in 2021, slowing the 2.4 percent growth logged in 2020.

Hours worked rose at a 2.4 percent rate last quarter, pulling back from the 7.3 percent growth pace in the October-December period.

Unit labor costs—the price of labor per single unit of output—advanced at a 0.3 percent rate. They surged at a 9.3 percent pace in the third quarter. Unit labor costs rose at a 3.1 percent rate from a year ago. They grew 3.3 percent in 2021 after increasing 4.5 percent 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 percent in the fourth quarter after increasing 1.3 percent in the July–September period. Labor costs surged 4.0 percent 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 percent rate last quarter. That followed a 3.9 percent growth pace in the third quarter. Compensation increased at a 5.1 percent rate compared to the fourth quarter of 2020. It increased 5.2 percent in 2021 after rising 7.0 percent in 2020.

Reuters