WASHINGTON (AFX) - Non-farm business productivity decelerated in the fourth quarter, rising at a 2.4 pct rate compared with a revised 3.0 pct increase in the third quarter, the Labor Department said. Unit labor costs, a figure closely followed for signs of inflation pressures, rose 4.1 pct in the fourth quarter after increasing a revised 3.2 pct in the third quarter. This is the largest gain since the second quarter of 1999.
Wall Street economists had expected an even more pronounced slowdown in productivity. The consensus forecast called for productivity to slow to a 1.9 pct rise, and for unit labor costs to rise 3.4 pct.
On a year-on-year basis, productivity rose 3.4 pct, down from a 4.8 pct gain in the third quarter.
Despite the slowdown in the fourth quarter, productivity for the full year 2000, rose 4.3 pct, the largest increase since 1983. Third quarter productivity rose a revised 3.0 pct, down from the previous estimate of a 3.3 pct gain.
The slowdown in productivity in the fourth quarter came as both output growth slipped and hours worked fell.
In the fourth quarter, output rose 1.2 pct, which is down from the 2.3 pct gain in the third quarter.
Hours worked fell 1.1 pct after falling 0.7 pct in the third quarter. This is the biggest drop in hours worked since the first quarter of 1992.
On a year-on-year basis, unit labor costs were up 2.2 pct. Hourly compensation rose 6.6 pct, while real compensation, which is adjusted for inflation, rose 3.8 pct. This is the strongest increase since the first quarter of 1998.
Overall productivity, which includes the farming sector, rose 3.2 pct for the quarter, up from a revised 2.4 pct in the third quarter. In the manufacturing sector, productivity rose at a 4.8 pct rate, down from a revised 6.7 pct in the third quarter. On a year-on-year basis, manufacuturing productivity was up 6.5 pct.
The department said manufacturing output fell 2.1 pct and hours worked fell 6.6 pct.
The implicit price deflator for non-farm business, a measure of inflation, rose 1.7 pct in the fourth quarter, up from a 1.4 pct increase in the previous three months.