Q4 Productivity Rises More Than Expected

The productivity of U.S. workers rose more than expected in the fourth quarter of last year even as the economy slowed, and for the year productivity gains were the largest in more than 50 years, the government said Thursday.

The Labor Department said the productivity of workers outside the farm sector rose by 0.8 percent, previously reported as a 0.2 percent decline for the quarter. The gain was bigger than the 0.5 percent advance economists in a Reuters poll had forecast.

"Still a soft quarter but you have to take it with a grain of salt because over the last four quarters you still have a productivity boom underway," said Avery Shenfeld, senior economist at CIBC World Markets.

For the year, nonfarm productivity advanced by 4.8 percent, the biggest yearly gain since 1950, the Department said.

Unit labor costs, a closely watched measure of wage pressures, climbed 3.8 percent during the fourth quarter, but they were down 1.9 percent for the year. Hourly compensation advanced by 4.6 percent in the fourth quarter and by a smaller 2.8 percent for the year.

Growth in productivity, which measures the amount of goods and services produced for each hour of work, has been cited by analysts and the Federal Reserve as a key factor in the economic recovery. The Labor Department's latest report will no doubt be closely watched by Fed officials, who are expected to meet later this month to set interest rates.

In the manufacturing sector, hardest hit after the U.S. economy sank into recession in 2001, productivity inched ahead by 0.1 percent during the fourth quarter, the smallest showing since a flat reading in the second quarter of 2001.