U.S. labor expenses were unexpectedly sharply revised upward, indicating that inflationary pressures were much stronger than previously believed in the fourth quarter of last year.
The Labor Department said on Thursday that annualized increases in unit labor costs—a measure of what companies spend to create a unit of output—rose by 3.2 percent from October through December.
The preliminary projection, made public last month, projected a 1.1 percent growth rate in labor expenses.
The increased revision to 1.4 percent was what economists had predicted. The projection for unit labor expenses that was highest was 1.9 percent.
Compared to the initial forecast of 5.7 percent, the cost of labor increased by 6.5 percent in 2022.
The initial projection of 4.1 percent was revised up to an increase in hourly compensation of 4.9 percent. Hourly pay increased by 4.4 percent as compared to the fourth quarter of 2021.
A decrease was made in American workers’ productivity, which is calculated as output per hour worked. According to the first projection, productivity would increase by 3% annually. The revised estimate shows a 1.7% increase in productivity. The growth of 2.5% was what economists had predicted.
The rise in hours worked was raised up to 1.4%, nearly triple the earlier estimate of just 0.5%.
The biggest loss in productivity since 1974, with an average yearly decline of 1.7 percent in 2022, is worse than the initial forecast of minus 1.3 percent.
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