U.S. nonfarm unit labor costs rose at a 2.6% annual rate of growth in the fourth quarter, above the 2.1% rise seen in the preliminary report, the Bureau of Labor Statistics reported yesterday. Unit labor costs fell a revised 2.7% in the third quarter and 1.3% in the second quarter.

Productivity growth rose at a faster-than-expected 1.9% annual rate in the fourth quarter, up from the 1.8% in the preliminary report, a sharp deceleration from the 6.3% rise in the third quarter. Output growth slowed to a 0.3% annual rate of growth from the 5.6% rate in the third quarter. At the same time, hours worked fell 1.6% at an annual rate in the quarter, a faster rate of decline than the 0.6% drop in the third quarter.

The bureau said the data includes the benchmark revisions to the employment data released on Feb. 1.

Hourly compensation growth rose at a 4.6% annual rate, above the 3.4% rate in the previous quarter. Real compensation growth fell 0.5% in the fourth quarter after the 0.6% rise in the third as the implicit price deflator rose 1.6%.

Year-over-year growth in unit labor costs slowed dramatically in the quarter, rising only 0.9% from the fourth quarter of 2006, compared with a 2.8% year-over-year rise in the third quarter. Fourth-quarter productivity was up 2.9% year over year, the same as in the previous quarter.

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