In the fourth quarter U.S. productivity increased 3.0% (ahead of consensus 2.5%), as output increased 3.5% and hours worked increased 0.5%. This followed an upwardly revised 1.4% increase (from 0.8%) in the third quarter. Productivity increasing is one way to lower inflation and a way to increase profitability, and lower unit labor costs. Unit labor costs rose 1.1% (lower than the consensus 1.5%) following a downwardly revised 2.0% (from 2.4%) in the third quarter. The Fed is keeping a sharp eye on labor costs with Chairman Powell mentioning them in yesterday’s post FOMC press conference.
This report was received well by stock and bond markets alike as the improvement in productivity helped tame unit labor costs, which is something the Federal Reserve welcomes.
- The increase in unit labor costs reflected a 4.1% increase in hourly compensation and a 3.0% increase in productivity.
- Manufacturing sector labor productivity decreased 1.5% in Q4, as output decreased 2.6% and hours worked decreased 1.1%. Unit labor costs in the total manufacturing sector increased 4.8%, driven by a 3.2% increase in hourly compensations and a 1.5% decrease in productivity.
- From the same quarter a year ago, nonfarm business sector labor productivity decreased 1.5%.
- Annual average productivity decreased 1.3% from 2021 to 2022, marking the largest annual decline since 1974 when productivity decreased 1.7%.
From the TradersCommunity News Desk