March 7, 2019 / 1:45 PM / 12 days ago

U.S. productivity rises more than expected in fourth quarter

WASHINGTON, March 7 - U.S. worker productivity rose more than expected in the fourth quarter, leading to the biggest annual increase in eight years.

FILE PHOTO: A worker cuts a steel coil at the Novolipetsk Steel PAO steel mill in Farrell, Pennsylvania, U.S., March 9, 2018. REUTERS/Aaron Josefczyk

The Labor Department said on Thursday non farm productivity, which measures hourly output per worker, increased at a 1.9 percent annualized rate in the last quarter.

Data for the third quarter was revised down to show productivity rising at a pace of 1.8 percent instead of the previously reported 2.2 percent rate.

Economists polled by Reuters had forecast fourth-quarter productivity advancing at a 1.6 percent rate following a moderation in gross domestic product growth for that period. The economy grew at a 2.6 percent rate in the October-December period after a robust 3.4 percent growth pace in the third quarter.

The release of the full fourth-quarter productivity report was delayed by a 35-day partial shutdown of the U.S. government that ended on Jan. 25. The lapse in funding affected the collection and processing of economic data by the Commerce Department.

Compared to the fourth quarter of 2017, productivity increased at a rate of 1.8 percent. Productivity grew 1.3 percent in 2018, the strongest since 2010, after rising 1.1 percent in 2017.

Sluggish productivity is one of the constraints to keeping the economy on a path of strong growth on a sustained basis.

Unit labor costs, the price of labor per single unit of output, rose at a 2.0 percent pace in the fourth quarter.

Unit labor costs in the July-September period grew at a 1.6 percent rate. Labor costs increased at a 1.0 percent rate compared to the fourth quarter of 2017.

They increased 1.4 percent in 2018, the smallest gain since 2016, after rising 2.2 percent in 2017.

Despite moderate gains in labor costs, compensation is rising. Hourly compensation increased at a 3.9 percent rate in the fourth quarter after advancing at a 3.5 percent pace in the July-September period. Hourly compensation increased at a 2.8 percent rate compared to the fourth quarter of 2017. It increased 2.7 percent in 2018.

Reporting by Lucia Mutikani Editing by Paul Simao

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