Government Drops Q406 Productivity Estimate

March 6, 2007 ( - The U.S. Department of Labor (DoL) on Tuesday said the productivity of American workers during the fourth quarter of 2006 was actually a little more than half the gain estimated about a month ago.

The DoL’s Bureau of Labor Statistics (BLS) said in a news release that Q406 productivity rose at an annual rate of 1.6% – far below the 3% increase the government initially estimated (See Labor Costs and Productivity Escalate in Q406 ). Productivity is defined as the amount of output per hour of work.

Hourly fourth quarter compensation grew by a revised 7.5% – ahead of the original estimate of 4.8%. When the revised 2.1% decrease in consumer prices was taken into account, real hourly compensation grew 9.8% during the fourth quarter – above the original 7.1% estimate. This measure includes wages and salaries, supplements, employer contributions to employee-benefit plans, and taxes.

The report showed that labor costs for each unit of output soared by 6.6%, far higher than the 1.7% increase initially reported. The 6.6% surge in labor costs far outpaced the 3.2% rise that Wall Street had been expecting while the 1.6% productivity hike was in line with expectations, according to an Associated Press report.

The big revision in productivity reflected the big downward change announced last week in total economic growth, as measured by the gross domestic product.

It was the biggest quarterly increase in labor costs since a 9.1% surge in the first three months of 2006, according to the AP. Both gains were attributed in large part to big bonuses paid to high-income workers.

The full revised report is here .