U.S. Productivity Gains Exceed Forecasts Even as Output Cools

(Bloomberg) -- Productivity gains in the U.S. last quarter exceeded forecasts though were little changed from the prior reading as output and hours worked both cooled, with efficiency improvements surpassing the recent average for a third period.

Nonfarm business employee output per hour increased at a 1.9 percent annualized rate, according to Labor Department figures Thursday that were delayed a month by the government shutdown. That compared with the 1.5 percent median estimate in Bloomberg's survey of economists and followed a downwardly revised 1.8 percent in the third quarter. Unit labor costs rose at a 2 percent rate following 1.6 percent.

Key Insights

• The data indicate employers may be starting to coax more output from workers, a development that could aid growth just as analysts project the economy will decelerate this year. Productivity growth has averaged 1.3 percent from 2007 to 2018, compared with 2.7 percent from 2000 to 2007, according to Labor Department figures that included historical revisions on Thursday.
  
• The productivity figures partly reflect a cooling in economic growth last quarter. Thursday's report showed gains in output eased to 3.1 percent from 4 percent, while the increase in hours worked fell to 1.2 percent from 2.1 percent.
  
• Trump administration officials say that the Republican- backed tax cuts will fuel a jump in productivity as corporations invest in equipment that can boost output and increase worker pay. While business spending has picked up over the past year, it remains to be seen whether there will be a sustained acceleration in efficiency.
  

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• From a year earlier, productivity rose 1.8 percent during the fourth quarter, while the 2018 annual average increase of 1.3 percent was the highest since 2015.
  
• A separate report on Thursday showed the labor market remains tight. Filings for unemployment benefits fell last week to 223,000, not far from the lowest level since 1969, according to Labor Department figures. The number of Americans on jobless-benefit rolls declined during the prior week by 50,000 to 1.76 million.
  
• The productivity report showed fourth-quarter inflation- adjusted hourly compensation rose at a 2.4 percent pace, the most in more than a year, after a 1.4 percent gain.
  
• Release of the fourth-quarter productivity reading was delayed by the government shutdown because the Labor Department -- which remained open during the impasse -- relies on data for the report from the Commerce Department, which was closed.
  

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