U.S. Labor Productivity Spikes In Q4, Labor Costs Show Modest Increase

Reflecting a spike in output, the Labor Department released a report on Thursday showing U.S. labor productivity rebounded by much more than anticipated in the fourth quarter of 2021.

The report said labor productivity soared by 6.6 percent in the fourth quarter after tumbling by a revised 5.0 percent in the third quarter.

Economists had expected productivity to jump by 3.2 percent compared to the 5.2 percent nosedive that had been reported for the previous quarter.

The substantial rebound in production, a measure of output per hour, came as output skyrocketed by 9.2 percent compared to a 2.4 percent increase in hours worked.

“Productivity data continue to be heavily influenced by the pandemic and will likely stay volatile in the near-term,” said Lydia Boussour, Lead US Economist at Oxford Economics.

She added, “But looking past the pandemic swings, we believe that continued strong investment in technology, greater business dynamism, faster technology adoption, and lasting remote work will power above-trend productivity growth in the post-Covid era.”

Meanwhile, the Labor Department said unit labor costs edged up by 0.3 percent in the fourth quarter after soaring by a revised 9.3 percent in the third quarter.

Unit labor costs were expected to shoot up by 1.5 percent compared to the 9.6 percent spike that had been reported for the previous quarter.

The much smaller than expected uptick in unit labor costs came as the surge in productivity largely offset a 6.9 percent jump in hourly compensation.

The report showed real hourly compensation, which takes changes in consumer prices into account, slid by 1.2 percent in the fourth quarter after slumping by 2.6 percent in the third quarter.

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