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Productivity: Another Rebound But Trends Still Concerning

February 2, 2023
Bottom Line: Productivity rose 3% annualized in the 4th Quarter, better than expected, as until output increased sharply more than hours worked. Unit labor costs rose 1.1%, reflecting a 4.1% increase in hourly compensation against the gain in productivity. With stronger growth in the 2nd half, the last two quarters saw both output and labor productivity increase after declines in output in the first half. That said, manufacturing sector productivity remains a concern, dropping by 1.5% in the 4th Quarter as output fell more than hours worked. Moreover, unit labor costs rose sharply as manufacturers held onto and even gave raises to employees, despite slower production.  Overall, the rebound in productivity did little to change the slowing trend, and key sectors like manufacturing show even more concerning trends. 
Article by Contingent Macro