In 2022, American employees’ productivity fell by the most per year in over five decades.
When compared to the same period the previous year, nonfarm labor productivity, which compares the production of goods and services to the number of hours worked, fell 1.5% in the final three months of the year. This fall was the largest in forty years, with the exception of larger declines earlier in 2022.
The largest annual decline in productivity since 1974, when it decreased by an average of 1.7 percent, was in 2022 when it decreased by 1.3 percent.
The production of last year was erratic. On a 12-month basis, productivity decreased by 0.4 percent in the first quarter, by 2.1 percent in the second quarter, and by 1.1 percent in the third quarter.
However, productivity increased at a seasonally adjusted and annualized rate of 3% compared to the preceding quarter, topping Wall Street’s forecasts for a 2.4 % rise. Productivity increased at an annualized pace of 1.4 percent in the third quarter compared to the second, which was higher than the initial forecast of 0.8 percent.
Before those two straight quarters of growth, the first quarter’s decline was 5.9 percent, and the second quarter’s decline was 4.1 percent. The most severe decline since the spring of 1960 occurred in the first quarter. Other than that, the second quarter was the weakest since productivity fell by 4.1 percent in 1990.
For the second straight quarter, U.S. worker productivity increased. However, for the whole year, productivity experienced its greatest decrease in five decades.
The Labor Dept. said on Thursday that the increase in U.S. nonfarm labor productivity, which is a gauge of the amount of stuff produced in the country per hour worked, was 3% in the fourth quarter compared to the third quarter.
The Labor Dept. said that unit labor expenses, a metric that contrasts worker compensation with productivity, increased at an annualized rate of 1.1 percent in the fourth quarter compared to the third quarter. That represents a 3.0 percent rise in productivity and a 4.1 percent increase in hourly pay.
Over the past four quarters, unit labor expenses climbed by 4.5 percent, which is about double the rate required by the Federal Reserve’s inflation mandate.