4th Quarter Productivity Soft, Labor Costs Increase

Flat output and a rise in hours worked combined to sink fourth-quarter productivity to an annualized rate of minus 3.0 percent. The Econoday consensus was minus 1.8 percent with the low estimate at minus 2.6 percent. Weak output together with a moderate 1.3 percent rise in compensation lifted unit labor costs to a plus 4.5 percent rate which is just at the consensus for 4.4 percent.

Lack of output, at only a plus 0.1 percent rate, is the weak baseline in this report. The rise in hours worked, at a sharp 3.3 percent rate, is the highest since fourth-quarter 2014 while, in a plus for profits but less for the inflation outlook, the rise in compensation is the lowest result since second-quarter 2014.

Year-on-year data are more favorable with productivity at plus 0.3 percent, still very weak, and labor costs at a less severe plus 2.8 percent.

The nation's productivity has been soft for the last three years, posing questions for policy makers and underscoring the effects of full employment and limited investment in new technologies.

Recent History Of This Indicator:
Pulled down by low output, non-farm productivity is expected to move back into the minus column for the fourth quarter, to a minus 1.8 percent annualized rate. And low productivity makes for high labor costs which are expected to rise at a steep 4.4 percent rate.