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Numbers: U.S. business and employee productivity rose 2.7% in the fourth quarter from a year earlier, suggesting the economy may grow faster than expected even as inflation slows. there is a possibility.
Productivity increased by 3.3% in the fourth quarter. the government saidafter surging 4.9% in the third quarter.
After a decline in productivity in 2022, recent productivity gains are a welcome sign.
Improving productivity is the secret to the economy. When it rises, businesses earn larger profits and workers receive higher wages. Improving productivity also helps reduce inflation.
However, it is still too early to tell whether recent trends are sustainable. Productivity had been growing slowly for several years before the pandemic, with little sign of improvement.
Some economists argue that new technologies such as artificial intelligence could boost productivity in the coming years.
The big picture: Productivity is difficult to measure and new trends often take time to emerge. However, recent trends look promising.
Main details: Output, or the amount of goods and services produced, grew sharply at an annual rate of 3.7% in the fourth quarter.
Employee hours worked increased slightly by 0.4%.
Productivity is determined by the difference between output and working hours.
Productivity increases occur when employees produce more goods or services (for example, boxes of widgets or number of restaurant customers served) per hour than they did the previous year.
Unit labor costs rose 0.5% in the quarter and 2.3% over the past year. This metric reflects the cost of manufacturing each product.
Unit labor costs rose 5.6% in 2022 as inflation plagued the US economy.
Future prospects: “As we have emphasized over the past eight months, the recovery in productivity is encouraging for inflation and the overall economic outlook,” said Gregory Daco, chief economist at EY Parthenon.
“If companies can achieve strong productivity growth, they will be able to control costs and protect profits without sacrificing talent, even in an environment where wages continue to rise and pricing power declines,” he said. Stated.
Market reaction: Dow Jones Industrial Average DJIA and S&P 500 SPX,
The stock was expected to open higher on Thursday.