U.S. Labor Productivity Growth Slows More Than Expected In Q4

(RTTNews) - A report released by the Labor Department on Thursday showed U.S. labor productivity and unit labor costs both increased by less than expected in the fourth quarter of 2024.

The Labor Department said labor productivity climbed by 1.2 percent in the fourth quarter after surging by an upwardly revised 2.3 percent in the third quarter. Economists had expected labor productivity to jump by 1.7 percent.

The bigger than expected slowdown in the pace of productivity growth came as output shot up by 2.3 percent in the fourth quarter compared to the 3.6 percent spike in the third quarter. Productivity is a measure of output per hour.

The report said hours worked increased by 1.0 percent in the fourth quarter after climbing by 1.3 percent in the third quarter.

"After stronger readings the previous two quarters, weaker productivity growth to end 2024 tempers optimism about output gains heading into 2025," said Nationwide Senior Economist Ben.

"Rising labor costs continue to be a concern for many businesses, pressuring margins amid signs that consumer demand is waning," he added. "This could add further caution for business investment flows this year, in addition to elevated uncertainties regarding tariffs and interest rates."

The Labor Department also said unit labor costs surged by 3.0 percent in the third quarter after rising by a downwardly revised 0.5 percent in the third quarter. Economists had expected unit labor costs to soar by 3.8 percent.

The report said hourly compensation spiked by 4.2 percent in the fourth quarter after surging by 2.9 percent in the third quarter.

Meanwhile, real hourly compensation, which takes changes in consumer prices into account, increased by 1.1 percent in the fourth quarter after jumping by 1.6 percent in the third quarter.