American productivity ends 2012 up 1%

U.S. worker productivity shrank in the final three months of 2012, but analysts say the decline was largely caused by temporary factors. Productivity contracted at an annual rate of 2% in the October-December quarter, the biggest drop since the first quarter of 2011, the Labor Department reported Thursday. Productivity had risen at a 3.2% rate in the July-September quarter. Labor costs rose at a 4.5% rate in the fourth quarter, the fastest gain since the first quarter of 2012. Productivity is the amount of output per hour of work. It shrank in the fourth quarter because economic activity contracted while hours worked rose. The economy declined at an annual rate of 0.1% in the last three months of 2012, a drop caused mainly by deep defense cuts and slower restocking, changes not expected to last. The trend in productivity has been weak for the past two years. For all of 2012, productivity rose by just 1% following an even smaller 0.7% rise in 2011. Those gains were less than half the average growth that companies saw in 2009 and 2010, shortly after many laid off workers to cut costs during the Great Recession. And it’s below the long-run growth of 2.2% a year dating back to 1947.