U.S. Worker Productivity Falls in Last Quarter; Labor Costs Rose

U.S. worker productivity fell 0.5% in the fourth quarter of 2005, for the first time in almost five years, according to revised Labor Department statistics. Labor costs increased 3.3%, the largest gain in a year.

Growth in productivity is starting to ease as companies find that they have wrung out about all they can from their workforces and equipment, as reported by Bloomberg.com. Limits on the ability to meet demand are encouraging employers to increase hiring and to consider offering larger salaries to attract qualified workers, economists said.

Productivity in total manufacturing grew at a 4.7% annual rate in the fourth quarter of 2005, more than the 3.9% preliminary estimate.

For 2005, productivity increased 2.9%, the slowest since 2001. Productivity rose 3.4% in 2004. Labor costs rose 2.6% in 2005, after a 1.1% increase in 2004.

The productivity figures show an improvement from the initial productivity estimate because a Feb. 28 report showed stronger economic growth in the fourth quarter than the government first estimate.