Productivity and Labor Costs Rose More Than Expected in Fourth Quarter

This morning's preliminary fourth quarter productivity report could rejigger the market's thoughts about the health of the economy and, perhaps more importantly these days, expectations about upcoming interest rate plans.

The numbers were mixed, with productivity stronger than expected, but labor costs per unit also very strong. Productivity measures changes in output per hour for all members of the nation's workforce, while unit labor costs measure the labor costs for each unit of output. Preliminary fourth quarter productivity came in up 2.4%, compared with economists consensus forecasts for a 2.0% increase. The third quarter was revised down to 3.0% from 3.3%.

Unit labor costs grew 4.1% on the quarter. Economists were expecting 3.3%. Third quarter unit labor costs were revised upwards to a 3.2% rise from a 2.9% rise. The fourth quarter rise in unit labor costs is its biggest gain since second quarter of 1999, when it rose 4.3%. ...