US Worker Efficiency Rises in Q4, Amid an Uptick in Unemployment Claims

ByDayne Lee

Feb 3, 2024

In Washington, on February 1, it was reported that US worker productivity experienced a significant increase in the fourth quarter, surpassing forecasts and aiding the Federal Reserve’s efforts to control inflation. The Bureau of Labor Statistics announced that nonfarm productivity, reflecting the hourly output per worker, rose at an annualized rate of 3.2% in the last quarter. This adjustment came after the third quarter’s productivity growth was revised down to 4.9% from an initial estimate of 5.2%, against economists’ expectations of a 2.5% increase.

Unit Labor Costs Remain Controlled

Unit labor costs, indicative of the labor expense for producing a unit of output, saw a modest rebound, growing at a 0.5% rate after a 1.1% decrease in the third quarter. This data aligns with the recent slowdown in compensation cost increases, marking the smallest rise since 2021, as reported on Wednesday.

Federal Reserve’s Stance on Interest Rates

The Federal Reserve opted to maintain interest rates on Wednesday, with Fed Chair Jerome Powell suggesting that the policy rate may have reached its peak for the current tightening cycle. Powell hinted at a potential reduction in policy restraint later this year, contingent on the economy’s performance aligning with expectations. Since March 2022, the Fed has escalated its policy rate by 525 basis points, reaching a range of 5.25%-5.50%.

Labor Market Shows Signs of Easing

The labor market is showing signs of gradual relaxation, potentially aiding in the mitigation of wage-driven inflation. Another report from the Labor Department indicated a slight increase in initial claims for state unemployment benefits, rising by 9,000 to a seasonally adjusted 224,000 for the week ending January 27, slightly above the forecasted 212,000 claims.

Employment Dynamics

Despite challenges in finding labor post-Covid-19 pandemic, employers are keen on retaining staff. However, some businesses that thrived during the pandemic are now adjusting to normalized conditions, leading to layoffs, such as the United Parcel Service’s recent announcement of 12,000 job cuts.

Job Cut Trends

According to Challenger, Gray & Christmas, US-based employers announced a 136% increase in job cuts to 82,307 in January from December, though this represents a 20% decrease compared to January 2023.

The employment report due for release on Friday is anticipated to show a growth of 180,000 jobs in January, down from December’s 216,000 additions, with the unemployment rate expected to rise slightly to 3.8% from 3.7%.

Featured image credit: Arthobbit via Getty Images

Dayne Lee

I have a background that includes experience as a day trader in the financial sector before transitioning into my current role as an editor. My focus is on ensuring our stories are accurate and engaging for our readers, and I enjoy collaborating with our writers to provide the best news coverage possible. This journey from finance to writing has been both challenging and rewarding.