Washington, DC, Feb. 5--The productivity of American workers slowed in the fourth quarter, suggesting that firms may have to start expanding payrolls in order to meet the nation's resurgent economic demand.
Nonfarm business productivity--the amount an employee produces per hour of work--grew at a seasonally adjusted annual rate of 2.7%, the Labor Department reported Thursday, down sharply from the third quarter's sizzling 9.5% pace.
The reading was in line with economists' forecast of 2.8% growth, according to a survey by Dow Jones Newswires and CNBC. Most economists had expected productivity to slow along with the economy, which saw gross domestic product growth moderate to a 4% rate in the fourth quarter, from the blistering 8.2% pace in the third.
After five straight quarters in which the rise in productivity exceeded GDP growth, the fourth quarter saw a 1.3% disparity, the biggest since the second quarter of 1999, wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note to clients. "We think this is a clear signal that the cyclical upsurge in productivity is fading, which means—assuming growth is anything like as strong as all the leading indicators suggests—employment has to start rising, fast."
The Labor Department said the slowdown also reflected the biggest increase in workers' hours in nearly three years at 1.5%, nearly double the third quarter's 0.8% gain.
Unit labor costs fell for a third consecutive quarter, dropping 1.3%. Hourly compensation rose 0.5% in the fourth quarter, adjusted for inflation.
Manufacturers of durable-goods enjoyed the biggest productivity gains during the quarter. Labor productivity among such companies increased 6.4%. Overall, the manufacturing sector saw a productivity gain of 4.8%.
