U.S. Labor Productivity Tumbles 4.2% In Q4, Less Than Previously Estimated

A report released by the Labor Department on Thursday showed U.S. labor productivity plunged by less than initially estimated in the fourth quarter of 2020.

The Labor Department said labor productivity tumbled by 4.2 percent in the fourth quarter compared to the previously reported 4.8 percent nosedive. Economists had expected the slump in productivity to be revised to 4.7 percent.

The revision to productivity, a measure of output per hour, reflected an upward revision to output and a downward revision to hours worked.

Output shot up by 5.5 percent compared to the previously reported 5.3 percent jump, while hours worked soared by 10.1 percent compared to the previously reported 10.7 percent spike.

Despite the revision, the steep drop in productivity in the fourth quarter still reflected a substantial downturn following a revised 4.2 percent surge in productivity in the third quarter.

“Looking ahead, we expect productivity to strengthen in coming quarters and remain well supported as the economy experiences a mini boom in activity and the labor market lags to overall economic recovery,” said Lydia Boussour, Lead U.S. Economist at Oxford Economics.

She added, “Stronger productivity gains should buffer companies’ bottom lines against rising input costs and further boost profit growth this year amid an expected surge in companies’ sales.”

The report also showed the spike in unit labor costs in the fourth quarter was downwardly revised to 6.0 percent from the previously reported 6.8 percent. The revised data was expected to show a 6.7 percent jump in labor costs.

The downward revision to labor costs reflected the revision to productivity as well as a downward revision to hourly compensation, which climbed by 1.5 percent compared to the previously reported 1.7 percent increase.

The sharp increase in labor costs in the fourth quarter reflected a significant rebound from the revised 9.6 percent nosedive in the third quarter.

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