Soaring Productivity Keeps Hiring Low in Late 2009

Washington, DC, March 4, 2010--U.S. businesses increased their productivity in the second half of the year more than previously reported, slashing hours by 1.3% even as they boosted their output by 2.5%, the Labor Department reported Thursday.

The surge in productivity explains how the economy could grow at a 5.9% pace in the fourth quarter without creating any jobs. And the report shows that slack in the labor market is a powerful deflationary force in the economy today.

Unit labor costs - a key inflationary gauge - fell sharply in the third and fourth quarters, the Bureau of Labor Statistics said. For all of 2009, unit labor costs fell 1.7%, the most since the records were first kept in 1948. Read the full report on the BLS website.

In the fourth quarter, productivity increased at a 6.9% annual rate, revised up from the 6.2% reported a month ago.

Economists were looking for a revision to 6.6%.

In the third quarter, productivity was revised higher to a 7.8% annual rate from 7.2% previously, the most in six years.

For all of 2009, productivity increased 3.8%, the most in seven years.

Unit labor costs fell a revised 5.9% in the fourth quarter and a revised 7.6% in the third quarter, the sharpest drop since 1949, the government said.