On Thursday, the U.S. Labor Department revealed that labor productivity in the country remarkably exceeded expectations for the fourth quarter of 2023. According to the report, labor productivity experienced a significant increase of 3.2 percent in the final quarter, after a high yet slightly adjusted downward surge of 4.9 percent in the third quarter.
Speculations by economic experts had anticipated a 2.5 percent rise in labor productivity, rather than the initial 5.2 percent rise that had been initially reported for the preceding quarter. The report further showed a significant 3.7 percent surge in output in the final quarter, a drastic difference compared to the mere 0.4 percent increase in working hours.
In the same vein, the Labor Department highlighted that unit labor costs modestly escalated by 0.5 percent in the fourth quarter, following a 1.1 percent drop in the third quarter. The outcomes superseded forecasts which had predicted a 1.7 percent rise compared to the 1.2 percent reduction that was reported in the previous quarter.
Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics, conveyed the moderate growth in unit labor costs, stating it was tamer than expected after a significant dip in quarter 3 - an indication that wage pressures are reducing. She further added that despite Fed Chair Powell's recent announcement that a rate cut for March is highly unlikely, the emerging evidence of controlled wage pressures, alongside a wider scope of inflation, may bring about a rate reduction by May.
Furthermore, the Labor Department also revealed a significant 3.7 percent leap in hourly compensation in the final quarter, which countered the surge in productivity. Real hourly compensation, which considers variations in consumer prices, ascended by 0.9 percent in the fourth quarter, after a slight 0.2 percent increase in the third quarter.
