U.S. labor productivity decreases more than forecast in the fourth quarter

The preliminary data from the U.S. Labour Department showed on Thursday that nonfarm business sector labor productivity in the United States fell 4.8 percent q-o-q in the fourth quarter of 2020, as output surged 5.3 percent q-o-q and hours worked jumped 10.7 percent q-o-q (seasonally adjusted). This was the largest decrease in productivity since the second quarter of 1981 and was worse than economists’ forecast for a 2.8 percent q-o-q drop after a revised 5.1 percent q-o-q climb in the third quarter (originally a 4.6 percent q-o-q gain).

In y-o-y terms, the labor productivity rose 2.5 percent in the third quarter, reflecting a 2.7-percent decline in output and a 5.0-percent fall in hours worked.

Meanwhile, unit labor costs in the nonfarm business sector in the fourth quarter rose 6.8 percent q-o-q compared to a revised 7.0 percent q-o-q fall in the prior quarter (originally a 6.6 percent q-o-q decline). 

Economists had forecast a 3.5 percent advance in fourth-quarter unit labor costs.

Unit labor costs quarterly decline reflected a 1.7-percent q-o-q increase in hourly compensation and a 4.8-percent drop in productivity.

Compared to the corresponding period of 2019, unit labor costs rose 5.2 percent.