WASHINGTON(Reuters) – U.S. worker productivity grew faster than expected in the fourth quarter, keeping unit labor costs contained and giving the Federal Reserve another boost in the fight against inflation.
Nonfarm productivity, which measures hourly output per worker, increased at a 3.2% annualized rate last quarter, the Labor Department’s Bureau of Labor Statistics said on Thursday.
Data for the third quarter was revised lower to show productivity growing at a still-solid 4.9% rate instead of the previously reported 5.2%. Economists polled by Reuters had forecast productivity increasing at a 2.5% rate.
Unit labor costs – the price of labor per single unit of output – rebounded at a 0.5% rate after declining at a 1.1% pace in the July-September quarter.
The report followed news on Wednesday that compensation costs rose in the fourth quarter at the slowest pace since 2021.
The U.S. central bank left interest rates unchanged on Wednesday. Fed Chair Jerome Powell told reporters that “we believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
The Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range since March 2022.
The labor market is also steadily easing, which could further help to curb wage inflation.
In separate report on Thursday, the Labor Department said initial claims for state unemployment benefits increased 9,000 to a seasonally adjusted 224,000 for the week ended Jan. 27. Economists had forecast 212,000 claims for the latest week.
Employers are holding on to their workers following difficulties finding labor during and after the COVID-19 pandemic. But some companies, which enjoyed a boom in business during the pandemic are laying off workers as conditions revert back to normal. The United Parcel Service said this week it planned to cut 12,000 jobs.
A third report from global outplacement firm Challenger, Gray & Christmas on Thursday showed U.S.-based employers announced 82,307 job cuts in January, a 136% jump from December. Layoffs were, however, down 20% compared to January 2023.
The claims data have no bearing on January’s employment report, scheduled to be released on Friday.
Nonfarm payrolls likely increased by 180,000 jobs last month, according to a Reuters survey of economists. The economy added 216,000 positions in December. The unemployment rate is forecast rising to 3.8% from 3.7% in December.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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