Productivity Rises 1.8%, Topping Estimates

U.S. productivity in the fourth quarter rose at a stronger-than-expected pace as the biggest cutback in working hours in nearly five years helped restrain growth in labor costs, a U.S. Labor Department report showed on Wednesday.

U.S. non-farm productivity, or hourly output per worker, rose at a 1.8 percent annual rate in the fourth-quarter, news that may help comfort a Federal Reserve that has shifted its focus away from inflation to slash interest rates in recent weeks to curb slowing growth.

The Labor Department also revised third-quarter productivity downward to an annual rate of 6 percent from its previously reported rise of 6.3 percent -- still the strongest gain in four years.

Economists polled by Reuters expected fourth-quarter nonfarm worker productivity to rise just 0.4 percent, with unit labor costs up 3.5 percent.

Unit labor costs, a gauge of inflation and profit pressures under close scrutiny by the Fed, rose 2.1 percent, the largest gain since the first quarter of 2007, when they rose 5.2 percent.

The drop in third-quarter unit labor costs also was revised to a 1.9 percent drop from a 2 percent decline.