Productivity surges 6.9 percent in 4th quarter while labor costs plunge 5.9 percent

Productivity up sharply, labor costs plunge in 4Q

WASHINGTON — Productivity in the final three months of last year surged at a faster pace than previously thought as labor costs fell more rapidly.

The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.

The combination of rising productivity and falling labor costs bolsters company profits and helps keep inflation at bay. But it also puts American households under stress, leaving them with less income to increase consumer spending, the key ingredient to economic growth.