--US Q4 non-farm productivity +2.4%; Q3 revised to +3.0%
--US Q4 non-farm unit labor costs +4.1%; Q3 revised to +3.2%
--US Q4 non-farm unit labor costs increase largest since Q2 1999
--US Q4 compensation per hour +6.6; Q3 revised to +6.2%
--US Q4 non-farm productivity from Q4 1999 +3.4%
--US Q4 non-farm unit labor costs from Q4 1999 +2.2%
--US 2000 non-farm productivity up 4.3%; largest gain since 1983

By Simon Kennedy, BridgeNews
Washington--Feb. 7--The productivity of the U.S. workforce climbed again in the fourth quarter, but like the overall economy, it slowed from previously rapid gains, the Labor Department reported Wednesday. Non-farm labor productivity increased at an annual rate of 2.4%, while unit labor costs surged 4.1%, the fastest increase since the second quarter of 1999.
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Analysts had expected productivity and unit labor costs to rise 2.0% and 3.5% respectively, having increased a revised 3.0% and 3.2% in the prior quarter. Productivity in the third quarter was previously reported at up 3.3%, while unit labor costs rose 2.9%.
Compared to the final three months of 1999, non-farm productivity rose 3.4%, while unit labor costs rose 2.2% over the same timeframe. For all of 2000, productivity rose 4.3%, the largest gain since 1983, while unit labor costs rose 0.7%.
The deceleration in productivity growth during the fourth quarter comes as the overall economy cools, forcing businesses to cut back on the capital spending that has previously allowed them to produce more goods for less.
Productivity growth double that of the prior 20 years has been a linchpin of the rosy economic environment since 1995, containing inflation, attracting funds from abroad, protecting profit margins and underpinning stock markets.
But some analysts contend the gains are cyclical or centered in the high-tech industry, meaning that as the economy fades so will the efficiency of its workers, removing a key support from the economy. However, the optimists--Federal Reserve chairman Alan Greenspan among them--argue that a good deal of the gains are structural and will continue to support the economy going forward, perhaps even helping it to stave off recession.
Greenspan noted in Jan. 25 testimony to Congress that the "apparent sustained strength" in productivity growth, despite a "pronounced slowing" in the growth of demand the 2000 second half, was an important test of the extent of improvement in structural productivity.
"These most recent indications have added to the accumulating evidence that the apparent increases in the growth of output per hour are more than transitory," he said.
Despite the largely academic debate, in the near-term financial markets may not welcome today's report in that it shows employment costs continuing to mount as productivity wanes. A more efficient workforce has allowed firms to offset higher wage bills without having to resort to trimming profit margins or hiking prices. Plump profit margins have underpinned stock markets in the past few years and the fact they may be weakening could weigh on equities, especially as weaker profits affect spending plans.
Non-farm productivity growth in the fourth quarter reflected a 1.1% fall in the annual rate of increase in non-farm hours worked, the weakest performance since the first quarter of 1992, and a 6.6% gain in hourly compensation, the strongest gain since the first quarter of 1992.
t After adjusting for changes in consumer prices, real compensation per hour was up 3.8% in the October-December period.

MANUFACTURING PRODUCTIVITY RISES AT 4.8% RATE
Manufacturing productivity rose at a 4.8% rate in the fourth quarter. Manufacturing unit labor costs rose climbed 3.6%, the steepest climb since the first quarter of 1991.
In the troubled durable goods sector, productivity rose 4.7%, as output fell 2.2%, and hours worked dropped 6.6%.

NONFINANCIAL CORPORATE PRODUCTIVITY
In the third quarter, productivity for nonfinancial corporations rose a revised 4.4%, while unit labor costs advanced a revised 1.5%. Fourth quarter details will be released March 6. End
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