For the first time since Q1 2016, US Worker Productivity declined in Q4 2017, after accelerating for three straight quarters.
The headline measure of nonfarm business employee output per hour decreased at 0.1% annualized rate (est. 0.7% gain) after a downwardly revised 2.7% gain in previous three months.
Unit labor costs rose at 2% annualized rate (est. 0.9% gain) following 0.1% decline.
As Blkoomberg warns, the data reinforce the trend of relatively paltry gains since the last recession ended, limiting the scope for economic growth to pick up without causing an unwanted acceleration in inflation. For the full year, productivity rose 1.2 percent, in line with the pace over the last decade.
The latest report also underscores that productivity figures can be volatile from quarter to quarter, and that the underlying trend may not have changed much despite the third quarter registering the fastest increase since early 2015.
Incoming Federal Reserve Chairman Jerome Powell has said that labor-force participation and productivity gains are key to lifting the sustainable rate of expansion in the world’s largest economy. Without a boost in productivity, President Donald Trump may find it difficult for growth to meet his 3 percent goal.
A modest silver-lining shows that among manufacturers, productivity rose at a 5.7% pace in the fourth quarter, most since 2010, rebounding from a 4.9% decline in the prior quarter. Productivity in sector was up 1.1% from year earlier.
However, adjusted for inflation, hourly earnings fell at a 1.8 percent annualized pace after a 0.6 percent increase.