US Q4 labour productivity pleases, but some see reversal ahead
US labour productivity grew more quickly than expected at the end of 2018, helping to dampen the impact on companies' margins from higher wages.
According to the Department of Labor, labour productivity grew at a quarterly annualised pace of 1.9% over the three months to December, alongside an increase of 3.9% in hourly compensation and a 2.0% jump in unit labour costs.
Economists had penciled-in productivity growth of 1.5% and of 2.0% for unit labor costs.
In year-on-year terms, productivity growth picked-up to a clip of 1.8% - its fastest pace since the first quarter of 2015.
That left the average pace over the latest three quarters "at a very respectable 2.2%" said In Shepherdson, chief economist at Pantheon Macroeconomics.
"But we think this will prove the high-water mark," he added.
The rate of increase in wage meanwhile accelerated to 2.8% versus a year ago, but unlike productivity which was expected to fall back alongside output, as the Trump White House's fiscal stimulus faded, Shepherdson was anticipating further increases which by the third quarter of 2019 would leave labour costs at up by 3% on the year, versus ahead by just 1.1% in the fourth quarter.
"These numbers, in short, will flip from market-friendly to disconcerting over a relatively short time. Right now, though, they signal no near-term inflation threat."