Productivity in US (Q4 2020) – Largest drop in 39 years

Nonfarm business sector labor productivity decreased 4.8 percent in the fourth quarter of 2020, the U.S. Bureau of Labor Statistics reported today, as output increased 5.3 percent and hours worked increased 10.7 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates, and show what the percent change would be if the quarterly rate continued for four quarters.)

The fourth-quarter 2020 decline in productivity is the largest quarterly decline in the measure since a decline of 5.1 percent in the second quarter of 1981. From the fourth quarter of 2019 to the fourth quarter of 2020, nonfarm business productivity increased 2.5 percent, reflecting a 2.7-percent decline in output and a 5.0-percent decline in hours worked. (See table A1.)

Unit labor costs in the nonfarm business sector increased at an annual rate of 6.8 percent in the fourth quarter of 2020, the combined effect of a 1.7-percent increase in hourly compensation and a 4.8-percent decline in productivity. Nonfarm business unit labor costs increased 5.2 percent over the last four quarters. (See table A1.)

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce
them.

Chosen excerpts by Job Market Monitor. Read the whole story @ Productivity and Costs, Fourth Quarter 2020, Preliminary