Productivity of U.S. workers fell in the fourth quarter of 2012 more than what was projected, as the economy in the U.S. shrank. That in turn caused the cost of labor to increase as businesses approached their limits of efficiency that they are able to reach with their current employees.
The output by employees dropped by the hour to a rate of 2% based on a full year, which was its worst rate in over two years. That followed an increase of nearly 3.2% during the three months from July through September. Expenses for individual workers jumped up 4.5%, which was higher than projected.
Companies, near the end of the year, increased their amount of hiring, which was a sign they had started to find it hard to work with the current staff and needed more employees due to sales increasing. Over the last three months of the year, spending by businesses and consumers increased even though a contraction took place in the economy because of less stockpiling and a drop in spending by defense.
Productivity for 2012 ended up 1% after gaining just 0.7% during 2011. However, that increase was more than 50% less than the average annual gain between 2000 and 2011.
The increases in labor expenses during the last three months of 2012 followed a 2.3% drop for the previous three months of July through September. Cost of labor for all of 2012 was up 0.7%.
Manufacturers fared better during the last quarter than many of the other sectors as their efficiency gain in productivity was up for the year by 0.5%.
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