US productivity records smallest annual gain since 2011

An employee installs wiring on the wing of a Boeing Co. 737 MAX 9 jetliner at the company's manufacturing facility in Renton, Washington, Feb. 13, 2017.
David Ryder | Bloomberg | Getty Images

The productivity of American workers grew at a slower pace in fourth quarter and last year recorded the smallest annual gain in five years.

The Labor Department says productivity grew at a 1.3 percent annual pace from October through December, down from 3.3 percent in the third quarter. For 2016, productivity eked out a 0.2 percent increase, smallest since a 0.1 percent gain in 2011.

Gains in productivity have slowed in recent years for reasons economists are struggling to understand.

Productivity measures output per hour worked. Increases are crucial for economic prosperity. When their workers are more productive, employers can afford to pay them more. And productivity gains, along with growth in the number of people working, determine how fast the economy grows.