A surprisingly sharp upward revision to U.S. labor costs indicates that inflationary pressures were running much hotter than thought in the fourth quarter of last year.
Unit labor costs—a measure of what employers pay to produce a unit of output—jumped at a 3.2 percent annualized rate in the October through December period, the Labor Department said on Thursday.
The initial estimate, released last month, had labor costs rising just at a pace of just 1.1 percent.
Economists had forecast an upward revision to 1.4 percent. The top of the range of forecasts for unit labor costs was 1.9 percent.
Labor costs jumped 6.5 percent in 2022, higher than the preliminary estimate of 5.7 percent.
Hourly compensation increased at a 4.9 percent pace, revised up from the initial estimate of 4.1 percent. Compared to the fourth quarter of 2021, hourly compensation was up 4.4 percent.
The productivity of American workers—which measures output per hour worked—was revised downward. The preliminary estimate had productivity rising at a three percent annual rate. The revision has productivity rising just 1.7 percent. Economists had forecast a 2.5 percent gain.
Hours worked rose a revised 1.4 percent, nearly three times the initial estimate of a 0.5 percent increase.
Average annual productivity fell 1.7 percent in 2022, worse than the preliminary estimate of minus 1.3 percent and the largest decline since 1974.
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