Productivity in the U.S. Unexpectedly Accelerates
The productivity of U.S. workers unexpectedly increased in the fourth quarter at a faster rate as companies sought to contain costs.
The measure of employee output per hour rose at a 2.6 percent annual rate, compared with a revised 2.4 percent gain in the previous three months, figures from the Labor Department showed today in Washington. Economists projected a 2 percent advance, according to the median forecast in a Bloomberg News survey. Labor expenses fell for fifth time in six quarters.
Employment may improve as companies such as Ford Motor Corp., which cut jobs and boosted efficiency during the recession, now look to expand as sales pick up. Falling labor costs give the Federal Reserve more reason to stick to its unconventional easing program through June.
“There is a good chance that productivity will slow further this year, as firms are increasingly forced to hire more workers to expand output,” Paul Ashworth, chief U.S. economist at Capital Economics Ltd. in Toronto, said in a note to clients. “That is good news for the unemployed.”
Estimates of the 68 economists surveyed ranged from increases of 0.4 percent to 3 percent.
Another Labor Department report showed the number of Americans filing first-time claims for unemployment insurance fell last week, led by southern states that were affected by storms in prior weeks. Applications for jobless benefits decreased by 42,000 to 415,000 in the week ended Jan. 29.
Stock-index futures held earlier losses as oil advanced after protests in Egypt turned violent. The March contract on the Standard & Poor’s 500 Index dropped 0.1 percent to 1,298.2 at 9:07 a.m. in New York. Treasuries fell, pushing up the yield on the benchmark 10-year note to 3.50 percent from 3.48 percent late yesterday.
Labor costs, adjusted for efficiency gains, dropped at a 0.6 percent pace following a 0.1 percent drop in the prior quarter, the Labor Department’s productivity report showed. Costs were projected to rise 0.2 percent, according to the Bloomberg survey median.
For all of 2010, productivity climbed 3.6 percent, the most since 2002. Labor costs fell 1.5 percent after a 1.6 percent decrease in 2009. It was the first back-to-back drop since 1962- 63, the Labor Department said.
Among manufacturers, productivity rose at a 5.8 percent annual pace, the most in a year, after rising 1.4 percent in the third quarter of the year.
The Labor Department may report tomorrow that the U.S. added 140,000 jobs in January, according to economist forecasts in a Bloomberg survey. The jobless rate probably rose to 9.5 percent from 9.4 percent in December.
The pace of job and employment growth will have to pick up further to bring down unemployment. Economists surveyed by Bloomberg last month projected the jobless rate will average 9.3 percent this year, compared with 9.6 percent in 2010 and 9.3 percent in 2009.
The economy accelerated at the end of 2010 as consumer spending climbed by the most in more than four years. Gross domestic product grew at a 3.2 percent annual rate, Commerce Department figures showed Jan. 28.
Ford and Norfolk Southern Corp. are among companies planning to increase payrolls this year. The Dearborn, Michigan- based automaker plans to hire more than 7,000 workers in the next two years, including engineers with expertise in battery- powered cars, Mark Truby, a company spokesman, said in an interview in Detroit on Jan. 10.
“Our service levels have improved and we’re continuing our targeted hiring and bringing on new locomotives in anticipation of future growth,” Charles Moorman, chief executive officer at Norfolk Southern, said on a Jan. 25 teleconference. “Looking ahead to 2011, we expect to handle increased business.”
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