Q4 productivity surges, bringing 2006 back to normal

Dean Baker has been worrying

for a while

about US

productivity. Could it be that he needn’t

have worried?

U.S. productivity up sharply in 4th quarter

The productivity of U.S. workers rose sharply in the fourth quarter and labor

cost growth slowed, but future revisions may temper what at first blush is

good news for the inflation-wary Federal Reserve.

Nonfarm business productivity, a gauge of how much a worker produces per hour,

mounted at a 3 percent annual pace in the final three months of 2006, the

Labor Department said on Wednesday.

Wall Street had expected a 1.8% rise in Q4 productivity, not a 3% rise –

so you can see why David

Altig (who has lots of pretty charts) says that the report "makes it

easy to feel good".

On the other hand, it’s not that hard to feel bad if you try hard enough: Q3

productivity was revised down to -0.1%, which is frankly dreadful.

Here’s one of Altig’s charts. It seems that overall, 2006 (the yellow bars)

was pretty much in line with 2005 (the blue bars), while the final quarter of

2006 (the pink bars) was very strong indeed. So I’m not worrying too much.