Productivity Revised Upward
U.S. productivity growth was stronger than expected in the fourth quarter, helping allay inflation concerns that were recently stirred up by Alan Greenspan.
Productivity, which measures output per hour worked, rose at an annualized rate of 2.1% last quarter, up from the 0.8% estimated a month ago. Productivity grew by 4% for all of 2004, the third consecutive year growth has been at that level or above.
Economists had been expecting fourth-quarter productivity growth to be revised to 1.2%. For the third quarter, the Labor Department revised growth down to 1.3%, from 1.8%.
Another piece of the inflation picture was also benign. Unit labor costs, or the amount of money paid to workers to produce a given product, were revised down to 1.3% from 2.3%. It was the slowest unit cost rise in three quarters.
Thursday's report should help ease inflation concerns at the
Federal Reserve
, after Greenspan previously singled out declining productivity growth and higher unit labor costs as key threats to price stability.
"Unit labor costs had accelerated over 2004 owning to a tapering off in productivity growth," Greenspan said in congressional testimony two weeks ago.
The market continues to expect another 25-basis-point rate hike when the Fed meets again on March 22.
Another key piece of data, jobless claims, was released this morning. The number of people filing for unemployment insurance for the first time dropped to 310,000 from 311,000 according to the Labor Department, bringing the four-week moving average to its lowest point in four years.
While the number was encouraging, the week in question was holiday-shortened and included a snowstorm in the Northeast that might've kept benefit-seekers at home.