Worker Productivity Fell in Fourth Quarter

Washington, DC, March 5, 2009--Worker productivity fell by a worse-than-expected amount in the fourth quarter while wage pressures shot up at the fastest clip in two years.

The Labor Department said Thursday that productivity, the amount of output per hour of work, fell at an annual rate of 0.4 percent in the October-December period. At the same time, unit labor costs were surging by 5.7 percent.

While the combination of falling productivity and rising wage pressures would normally raise alarm bells about inflation, the threat of any resurgence of price pressures is seen as remote given the severity of the current recession.

The 0.4 percent decline in productivity was far weaker than the 1.5 percent increase that economists had expected. It represented a revision from the government's initial estimate a month ago that productivity in the fourth quarter was rising at an annual rate of 3.2 percent.

The 5.7 percent rise in unit labor costs was the largest quarterly gain since a 9.6 percent surge in the final three months of 2006.

For all of 2008, unit labor costs rose by a much more modest 0.9 percent, down from a gain of 2.7 percent in 2007. Economists said the decrease in the annual figure was more representative of the trend in labor pressures currently.