4Q Productivity Off 0.5%

Washington, DC, March 7, 2006–Productivity fell at a revised annual rate of 0.5% in the fourth quarter, a slight improvement from the negative 0.6% estimate made a month ago, the Labor Department said Tuesday.

It was the first decline in productivity since the first quarter of 2001, the quarter the recession began.

Unit labor costs–a key gauge of inflationary pressures – increased 3.3%, revised down from 3.5% earlier. It was the biggest increase in unit labor costs in a year.

Economists were expecting a larger upward revision in productivity to negative 0.2% and expected a larger downward revision in unit labor costs to rise 3.1%.

In the past four quarters, productivity has increased 2.5% while unit labor costs have increased 1.3%.

In all of 2005 compared to 2004, productivity increased 2.9%, the slowest growth since 2001. Unit labor costs rose 2.6% in 2005, the fastest gain since 2000.

Unit labor costs increased 3.3%. Real hourly compensation fell 0.4% in the quarter.

On a year-over-year basis labor costs are up 1.3%, the slowest growth in six quarters.

In the manufacturing sector, productivity increased 4.7% in the fourth quarter, with unit labor costs falling 2.8%. Output in manufacturing rose 9.3%, the most in eight years.