Here are the productivity statistics for the fourth quarter of 2007:
- Overall productivity increased at a annual rate of 1.8% (nearly double what analysts thought)
- This is compared to an increase of 6% in the third quarter
- For all of 2007, productivity was up 1.6%
- In 2006 it was 1%
- Earlier in the decade (2000-2004) productivity averaged 3.2%
- Labor costs rose by 2.1 percent (a little lower than analysts expectations)
- Labor costs fell by 1.9 percent in the third quarter
- Labor costs fell by 1.1 percent in the second quarter
- For all of 2007, labor costs were up 3.1%
- For all of 2006, labor costs were up 2.9%
- GDP was 0.6% in the fourth quarter (revised to a contraction of 0.2%)
When productivity outpaces labor costs then living standards improve. Why? Because it allows businesses to pay their employees more without raising the cost of their goods, which keeps inflation in check. That didn’t happen in the fourth quarter of 2007.
Revision: Productivity was revised to 1.9%
Revision: Labor costs changed from 2.1% to 2.6%
Remember, an increase in productivity is good for the economy because it
allows businesses to pay their workers more for their increased output,
without raising the cost of their products.
Working Thoughts 