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Preliminary Q4 Non-Farm Productivity Drops 2.0%; Labor Costs Jump 4.5%

WASHINGTON — U.S. nonfarm productivity fell 2.0% in the fourth quarter of 2012, as output growth slowed dramatically and hours worked growth was stronger than in the previous quarter, data released by the Bureau of Labor Statistics Thursday showed.

As a result of the sharp drop in productivity growth and a solid increase in compensation, unit labor costs rose 4.5% after a downward revised 2.3% decline in the previous quarter. Analysts in an MNI survey had expected unit labor costs to rise 3.3%.

The productivity decline was much larger than the 1.2% drop expected in an MNI survey of forecasts, but followed an upward revision in the previous quarter to a 3.2% rise from the previously reported 2.9% gain.

Output rose only 0.1% in the fourth quarter, as expected due to the weak hurricane-impacted reading for GDP in the quarter. This compared with the 4.7% rise in the previous quarter. Hours worked rose 2.2% in the fourth quarter, a larger rise than the 1.5% rate in the third quarter.

Hourly compensation jumped 2.4% in the quarter, a much stronger pace than the 0.8% increase in the previous quarter. Real compensation rose 0.3% in the fourth quarter following a 1.5% decline in the previous quarter.

On a year-over-year basis, productivity growth now stands at a 0.6% rate, down from 1.8% in the third quarter and the slowest since the fourth quarter of 2011. The year/year rate for unit labor costs rose to 1.9% in the fourth quarter from a flat reading in the third quarter.

For 2012 as a whole, nonfarm productivity rose 1.0%, slightly stronger than the 0.7% rise in 2011. Unit labor costs were up 0.7% in 2012, down sharply from the 2.0% rise in 2011.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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