US productivity up modest 1.9 per cent in fourth quarter - InfoNews

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US productivity up modest 1.9 per cent in fourth quarter

FILE- In this Jan. 4, 2019, file work continues on a plan of new homes in Franklin Park, Pa. On Thursday, March 7, the Labor Department issues revised data on productivity in the fourth quarter. (AP Photo/Keith Srakocic, File)
March 07, 2019 - 5:54 AM

WASHINGTON - U.S. productivity grew at a rate of 1.9 per cent in the fourth quarter, a slight improvement over the third quarter. Labor costs rose 2 per cent, the strongest gain since the beginning of 2018.

The Labor Department reported Thursday that the result from the October-December period was slightly better than a 1.8 per cent rise in the third quarter. For the full year, productivity rose 1.3 per cent, a small improvement from a 1.1 per cent gain in 2017. It was the best showing since a 3.4 per cent productivity surge in 2010.

Productivity is the amount of output per hour of work. The strong showing in 2010 had followed a 3.5 per cent surge in 2009. Those two strong years were the exceptions in the current nearly 10-year long recovery. Productivity overall has been extremely weak, and economists consider boosting productivity growth as the key challenge facing the U.S. economy.

Since 2007, productivity growth has averaged just 1.3 per cent a year, less than half the 2.7 per cent gain during the period from 2000 to 2007 and also below the average since 1947 of 2.1 per cent annual gains.

Economists attribute the solid gains before the deep 2007-2009 recession to the increasing use of technology in the workplace. But they have been stumped in trying to explain why productivity has slowed so much since the recession.

Without a significant improvement in productivity, analysts say that the Trump administration will not be able to achieve its goal of pushing overall economic growth to sustained annual gains of 3 per cent in the gross domestic product. GDP growth is determined by two major factors: growth in the labour force and growth in productivity.

The 2 per cent rate of increase in labour costs in the fourth quarter followed a 1.6 per cent third quarter gain. Labor costs rose 1.4 per cent for the year, lower than the 2.2 per cent increase in 2017.

The government reported last week that GDP grew at a 2.6 per cent rate in the fourth quarter, a slowdown from the previous two quarters. For the year, GDP grew 2.9 per cent, the best showing since 2015. However, analysts are forecasting growth to decelerate to just above 2 per cent as the boost from the 2017 tax cuts and increased government spending begin to wane.

In a separate report, the Labor Department said Thursday that the number of Americans filing for unemployment benefits fell to 223,000 last week, a drop of 3,000 from the previous week. Benefit applications, a proxy for layoffs, have been at ultra-low levels for an extended period, underlining the strength of the U.S. labour market. The government on Friday will release the February unemployment report. Many economists believe it will show unemployment edged back down to 3.9 per cent, from 4 per cent in January.

News from © The Associated Press, 2019
The Associated Press

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