U.S. Productivity Fell in Fourth Quarter as Labor Costs Rose
The productivity of U.S. workers fell in the fourth quarter by the most in four years, while labor expenses accelerated as companies added workers and boosted hours, revised Labor Department figures showed today.
The measure of employee output per hour decreased at a 1.9 percent annual rate after a 3.1 percent third-quarter gain, the agency said in Washington. The median forecast in a Bloomberg survey called for a 1.6 percent drop in productivity after a previously reported 2 percent decrease. Expenses per worker increased at a 4.6 percent rate, more than first estimated.
Companies took on more employees at the end of last year as orders for business equipment jumped and exports increased. The pace of payroll additions may be sustained as household spending holds up in the face of a two percentage-point increase in the payroll tax, making it difficult for productivity to improve.
“It’s tough to wring efficiencies out of labor when you’re adding to your workforce, whether you’re expanding hours or what’s now going on, expanding jobs,” Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, said before the report. The firm is the second-best forecaster of productivity over the past two years, according to data compiled by Bloomberg. “It’s quite natural at this point in the business cycle to have a temporary slowdown in productivity growth.”
Estimates of the 57 economists surveyed by Bloomberg ranged from declines of 1.3 percent to 2 percent.
Another Labor Department report showed the number of Americans who filed for unemployment benefits declined to a six- week low, pointing to further improvement in the labor market.
First-time jobless claims unexpectedly fell by 7,000 to 340,000 in the week ended March 2, the lowest since the period ended Jan. 19. The four-week average dropped to a five-year low.
Stock-index futures maintained gains after the figures, with the contract on the Standard & Poor’s 500 Index expiring this month rising 0.3 percent to 1,543.5 at 8:51 a.m. in New York.
For all of 2012, productivity climbed 0.7 percent after a 0.6 percent gain the prior year. The advance was less than half the 2.3 percent average from 2000 through 2011.
The increase in fourth-quarter labor expenses followed a 1.9 percent drop in the prior three months. Unit labor costs, which are adjusted for efficiency gains, were forecast to rise 4.3 percent, according to the Bloomberg survey median.
For all of 2012, labor costs increased 0.7 percent following a 2 percent gain a year earlier. They climbed an average of 1 percent from 2000 through 2011.
Output rose at a 0.5 percent rate in the fourth quarter after climbing 4.7 percent the prior quarter. Hours worked increased at a 2.5 percent pace after a 1.6 percent gain.
The drop in productivity was largely a result of special or one-time events that led to stagnation in the economy last quarter, and a jump in labor costs, economists said. Gross domestic product grew at a 0.1 percent annual rate from October through December, after rising at a 3.1 percent pace in the third quarter, according to Commerce Department data released Feb. 28.
Household purchases and capital investment accelerated, the data showed, even as military spending dropped by the most in 40 years and stockpiles were built at a slower pace, partly reflecting damage from superstorm Sandy.
Hiring accelerated in the fourth quarter, when job gains averaged 201,000 a month compared with 152,000 from July through September, according to Labor Department data on Feb. 1. The economy added about 160,000 workers in February, according to the survey median ahead of figures scheduled for release Friday.
“We have continuing high unemployment in the country so what we believe is we need consumer confidence to improve and jobs to be created to continue to get up to more normal numbers,” Chief Financial Officer Robert O’Shaughnessy said at a March 5 conference. “The good news is there is a lot of pent- up demand.”
Federal Reserve Chairman Ben S. Bernanke has said that while the expansion is gaining traction, the need for a stronger economic recovery outweighs the potential costs in financial markets of continuing unprecedented monetary easing.
“Available information suggests that economic growth has picked up again this year,” Bernanke said last week in testimony to the Senate Banking Committee in Washington.
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