U.S. productivity up in Q4 as labor costs decline again

The Labor Department said Thursday that productivity rose by a seasonally adjusted 6.2 percent in the fourth quarter, above analysts' expectations of a 6 percent rise.

The department also said labor costs fell 4.4 percent, the fourth straight decline. Falling labor costs can boost company profits. Hourly compensation rose 1.5 percent, the department said. But costs fell because the rise in compensation was much less than the productivity increase.

And the number of workers filing initial claims for jobless benefits rose unexpectedly last week, evidence that layoffs are continuing and jobs remain scarce, the department said.

The rise in claims is the fourth in the past five weeks. Most economists thought claims would resume a downward trend evident in the fall and early winter. The four-week average, which smooths fluctuations, rose for the third straight week to 468,750.

Productivity is up 5.1 percent in the past four quarters, the department said, the most since the 12 months ending with the first quarter of 2002.

Productivity often rises at the end of recessions as companies ramp up output before hiring new workers. Rising productivity can raise living standards in the long run. But it can also make it easier for companies to put off new hiring.

Output rose 7.2 percent, the department said, the largest increase since the third quarter of 2003. Hours worked rose 1 percent, the first increase since the second quarter of 2007.

Employers have shed 7.2 million workers since the recession began. Productivity has jumped as the economy has begun to recover. The nation's gross domestic product, the broadest measure of output, rose 5.7 percent in the October-December quarter, the fastest rise in six years.

The good news for workers is that economists say the increase in productivity is unsustainable. They expect that companies will soon have to increase hiring to maintain production.

Productivity is the key ingredient to rising living standards. It enables companies to pay workers more without raising prices and spurring inflation.

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