FXstreet.com (Barcelona) - Non farm productivity has increased above expectations in the fourth quarter, although well below the growing pace posted in the previous quarter, according to data released by the US Labor Department.

In the fourth quarter productivity has increased at a 1.8% pace in the United States, with output growing 0.4%, and hours decreasing 1.5%. The decrease on self-employment seems to have played a key role in the increase of productivity, according to Ian Shepherdson, Chief U.S. Economist at High Frequency Economics: A hefty drop in self-employment seems to have played a bigger role in depressing overall hours than we expected. The relatively robust productivity numbers helped offset a 3.9% jump in hourly compensation costs, keeping the unit labour cost numbers down.

The 1.8% increase is well above the 1.0% growing expectations advanced by market analysts, but sharply below the 6.3% increase posted in the third quarter. For the whole 2007 year, non-farm productivity has increased 1.6% from 2006.

Productivity rose 0.6% in the quarter in the business sector, and it went 2.5% up in the fourth quarter, in the year, output per hour average in the manufacturing session has risen 2.9%.

Shepherdson expects the productivity to decline in the next quarters which will increase labour costs: The quarterly numbers are hugely volatile, though, and what matters going forward is the trend in productivity growth, which we expect to slow sharply, reversing the revival in H2 last year. That will likely mean faster gains in unit labor costs, which implies further margin pressure; consumers can't pay higher prices.