The U.S. government on Thursday revised sharply downward fourth-quarter worker productivity, reflecting the economy's slow growth pace in the same period. The Labor Department said productivity—the amount of output per hour worked—rose at a 1.8 percent annual rate, down significantly from the previously reported 3.2 percent pace and the 3.5 percent third-quarter rate. Economists had expected fourth-quarter productivity to be revised down to a 2.5 percent rate. For all of 2013, productivity rose a tiny 0.5 percent, the smallest gain since 1993 and continuing a weak trend seen over the past three years. Analysts forecast a rebound in productivity this year, helped by stronger economic growth. The decline in fourth-quarter productivity was closely linked to a downward revision of gross domestic product (GDP), which the government cut last week to an annual rate of 2.4 percent from the previously estimated 3.2 percent rate. Greater productivity raises living standards because it enables companies to pay their workers more without having to raise prices, which could increase inflation. However, strong productivity limits new hiring, as companies can increase their output without adding workers.
