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U.S. productivity falls in fourth quarter; labor costs rise

Workers prepare outgoing shipments at an Amazon Fulfillment Center, ahead of the Christmas rush, in Tracy, California, November 30, 2014. REUTERS/Noah Berger

WASHINGTON (Reuters) - U.S. nonfarm productivity braked more sharply than expected in the fourth quarter, while unit labor costs rebounded after falling in the prior three months.

The Labor Department said on Thursday productivity fell at a 1.8 percent annual rate after rising at a revised 3.7 percent pace in the third quarter.

Economists had forecast productivity, which measures hourly output per worker, rising at a 0.5 percent pace.

Productivity was relatively weak for much of last year, increasing 0.8 percent compared to 0.9 percent in 2013.

Unit labor costs, a key gauge of inflation and profit pressures that measures the price of labor for any given unit of output, increased at a 2.7 percent rate in the fourth quarter after falling at a 2.3 percent rate in the third quarter.

For all of 2014, unit labor costs rose 1.5 percent compared to a gain of 0.2 percent in 2013. Hourly compensation rose at a 0.9 percent rate in the fourth quarter. It had risen at a 1.3 percent pace in the July-September quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao)