U.S. fourth-quarter productivity unrevised at sluggish 1.3 percent

[March 08, 2017]  WASHINGTON, (Reuters) - U.S. worker productivity slowed in the fourth quarter, as previously reported, suggesting it would be difficult to significantly boost economic growth.

The Labor Department said on Wednesday that nonfarm productivity, which measures hourly output per worker, rose at an annualized 1.3 percent rate in the final three months of 2016, as it had estimated last month.

President Donald Trump has pledged to boost annual economic growth to 4 percent, a promise that analysts say would be tough to deliver given weak productivity. The economy has not achieved 3 percent annual growth since the 2007-2009 recession ended.

Economists polled by Reuters had expected fourth-quarter productivity would be revised to show it rising at a 1.5 percent rate. Productivity grew at a 3.3 percent pace in the third quarter. It increased 0.2 percent in 2016, the smallest gain since 2011, after rising 0.9 percent in 2015.

Weak productivity has boosted employment growth as companies hire more workers to maintain output, partially explaining the divergence between payroll gains and economic growth. The economy grew 1.6 percent in 2016 while job growth averaged 187,000 per month.

Productivity has increased at an average annual rate of 0.6 percent over the last five years, well below its long-term rate of 2.1 percent from 1947 to 2016.

Soft productivity has lowered the economy's long-run potential and could undermine U.S. living standards. Some economists believe productivity is being inaccurately measured, especially on the information technology side.

Workers prepare outgoing shipments at an Amazon Fulfillment Center, ahead of the Christmas rush, in Tracy, California, November 30, 2014. REUTERS/Noah Berger

Others blame low capital expenditure, which they say has resulted in a sharp drop in the capital-to-labor ratio.

Unit labor costs, the price of labor per single unit of output, increased at an unrevised 1.7 percent pace in the fourth quarter. They rose at a 0.7 percent rate in the third quarter.

Unit labor costs rose 2.6 percent in 2016 after increasing 2.0 percent in 2015. The increase in hourly compensation per hour was also unrevised at a 3.0 percent rate in the fourth quarter, suggesting that wage growth is picking up.

Hourly compensation rose 2.9 percent in 2016 after a similar increase in 2015.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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