(RTTNews) - Thursday morning, the Labor Department released its report on productivity and unit labor costs in the fourth quarter of 2008. While productivity increased by much more than expected, both output and hours worked showed notable declines.

The report showed that non-farm labor productivity jumped 3.2 percent in the fourth quarter following a revised 1.5 percent increase in the third quarter. Economists had been expecting a more modest increase of about 1.5 percent.

A steep drop in hours worked contributed to the faster than expected productivity growth, with hours falling by 8.4 percent in the fourth quarter compared to a revised 3.4 percent decrease in the third quarter. The drop in hours in the fourth quarter marked the steepest decline since 1975.

While output also showed a notable decline, the decrease was not as steep as the drop in hours worked. Output fell by 5.5 percent in the fourth quarter after falling by an unrevised 1.9 percent in the previous quarter.

The report also showed that the pace of unit labor cost growth slowed to 1.8 percent in the fourth quarter from a revised 2.6 percent in the previous quarter. Cost growth had been expected to come in at 2.8 percent, unchanged from the growth originally reported for the third quarter.

However, real hourly compensation jumped by a record 15.6 percent during the fourth quarter, reflecting a decrease in consumer prices.

For the full year, the report showed that non-farm productivity increased by 2.8 percent, while unit labor costs edged up 0.5 percent.

In other economic news, the Labor Department said initial jobless claims in the week ended January 31st rose to 626,000 from the previous week’s revised figure of 591,000. With the increase, jobless claims rose to highest level since October of 1982.

Economists had expected jobless claims to edge down to 580,000 from the 588,000 originally reported for the previous week.

The Labor Department also said that the less volatile four-week moving average rose to 582,250 from the previous week’s revised average of 543,250. The four-week moving average also rose to a twenty-six year high, reaching the highest level since December of 1982.

Additionally, the report showed that continuing claims in the week ended January 24th rose to a new record high of 4.788 million from the preceding week’s revised level of 4.768 million.

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Posted in Categories: Economy, Forex, Releases, USA.

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