Fourth quarter unit labour costs undershoot forecasts

Improved productivity at the end of 2023 helped dampen labour cost growth.

According to the U.S. Department of Labor, in seasonally adjusted terms labour productivity rose at a quarterly annualised pace of 3.2% in the fourth quarter just ended (consensus: 2.5%).

Nominal hourly compensation meanwhile was up by 3.7%, such that so-called unit labour costs increased by only 0.5% (consensus: 1.7%).

"The solid increase in Q4 productivity growth takes the year-over-year rate to 2.7%, above even our bullish view that the medium-term trend is 1.5-to-2%," said Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics.

"That said, these numbers are wild in the short-term, and are subject to endless revisions, which can be large."