• Nonfarm worker productivity remains deepest drop in forty years.

• Compensation increases moderately.

• Unit labor costs surge shaved.

Revisions to nonfarm business sector productivity indicated a 4.2% decline during Q4'20 (SAAR, +2.4% y/y) versus the 4.8% weakening reported initially. The decline followed a 4.2% rise during Q3, revised from 5.1%. That followed an 11.1% Q2 increase, revised from 10.6%. A 4.6% decline had been expected in the Action Economics Forecast Survey. The latest remained the largest quarterly decline since Q2 1981. Annual productivity growth of 2.5% was the strongest for any year since 2010. Real output improved a little-revised 5.5% last quarter (-2.6% y/y) following an unchanged 44.1% Q3 surge. Hours-worked strengthened 10.1% last quarter (-4.9% y/y), revised from 10.7%, after increasing 38.3% in Q3. The decline in productivity raised unit labor costs by 6.0% (4.2% y/), revised from 6.8%. It offset a 9.6% Q3 decline, revised from -7.0%. A 6.5% rise had been expected for Q4. Hourly compensation rose a little-revised 1.5% (6.7% y/y) after falling 5.8%, revised from -2.2%.

Factory sector productivity increased 5.0% during Q4 (2.8% y/y), revised from 3.0%, following a record 20.7% Q3 gain, revised from 20.2%. Durable manufacturing productivity rose 6.4% (3.3% y/y) after surging 48.2% while nondurable manufacturing productivity rose 2.8% (1.6% y/y). Total manufacturing unit labor costs declined 8.8% (-0.1% y/y), revised from -2.4%, following a 27.4% drop, revised from -12.4%, during the third quarter. Compensation fell 4.2% last quarter (+2.7% y/y), revised from +0.5%, after a 12.4% Q3 shortfall, revised from +5.3%.

The productivity and labor cost figures are available in Haver's USECON database.