Worker productivity slows as labor costs rise in the final months of 2011

Economic Indicators , Labor Mar 07, 2012 No Comments

Labor costLabor costs increased at a 2.8 percent rate in the fourth quarter. That’s lower than the 3.9 percent rise in the third quarter, but much higher than the initial fourth-quarter estimate of 1.2%.

Growth in U.S. worker productivity slowed at the end of last year, while labor costs rose. Fewer gains in worker output suggests employers must add workers if they want to meet higher demand.

The Labor Department said Wednesday that productivity rose at an annual rate of 0.9 percent in the October-December quarter. While that’s a slight upward revision from last month’s preliminary estimate, it’s half the pace from the July-September quarter.

Productivity is the amount of output per hour of work. Worker productivity grew last year at the slowest pace in nearly a quarter of a century.
Labor cost

A slowdown in productivity is bad for corporate profits. But it can be a good sign for future hiring. It may mean that companies are unable to squeeze more work out of their existing work force and must add more workers if they want to grow.

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Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website

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