Productivity: Revised Sharply Lower

Bottom Line: The Bureau of Labor Statistics' annual benchmark revisions resulted in sharply lower productivity in the 4th Quarter than previously reported. Output growth was only modestly lower, but unit labor costs were sharply higher. Compensation costs were nearly 200 basis points higher than previously reported, up 6.4% annualized in the 4th Quarter and 7.05% from year-ago levels. Annual average productivity decreased 1.7% from 2021 to 2022. This is the largest annual decline in the measure since 1974. Overall, the 4th Quarter rebound in productivity was even less than previously reported and did little to change the slowing trend. Businesses have been content to avoid laying off workers (and in many cases have continued to pay them more) as activity has slowed.