U.S. Labor Productivity Pulls Back Sharply In Q4, Labor Costs Spike

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A report released by the Labor Department on Thursday showed a steep drop in U.S. labor productivity in the fourth quarter and a sharp increase in unit labor costs.

The Labor Department said labor productivity plunged by 4.8 percent in the fourth quarter after spiking by an upwardly revised 5.1 percent in the third quarter.

Economists had expected productivity to tumble by 2.8 percent compared to the 4.6 percent jump that had been reported for the previous quarter.

The substantial decrease in productivity, a measure of output per hour, came as hours worked soared by 10.7 percent compared to a 5.3 percent surge in output.

“Looking ahead, productivity growth should pick up later this year as the economic recovery gets a boost from the rollout of vaccines and sizeable fiscal stimulus,” said Lydia Boussour, Lead U.S. Economist at Oxford Economics.

She added, “However, we expect the gains to gradually revert back to a more subdued trend in the medium run.”

The report also showed unit labor costs skyrocketed by 6.8 percent in the fourth quarter after plummeting by a revised 7.7 percent in the third quarter.

Unit labor costs were expected to surge up by 3.9 percent compared to the 6.6 percent nosedive that had been reported for the previous quarter.

The spike in labor costs reflected the steep drop in productivity combined with a 1.7 percent increase in hourly compensation.


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