Nonfarm business sector labor productivity increased at a 6.9 percent annual rate during the fourth quarter of 2009, the U.S. Bureau of Labor
Statistics reported. The gain in productivity reflects a 7.6 percent increase in output partially offset by a 0.6 percent increase in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2008 to the fourth quarter of 2009, productivity increased 5.8 percent as output declined 0.2 percent and hours fell 5.7 percent. The annual measure of productivity increased 3.8 percent from 2008 to 2009.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in nonfarm businesses fell 5.9 percent in the fourth quarter of 2009, the result of productivity increasing faster than hourly
compensation. Unit labor costs decreased 4.7 percent from the same quarter a year ago, the largest four-quarter decline since the series began in 1948. The annual average index of unit labor costs declined 1.7 percent from 2008 to 2009, the largest decline in that 8-) series.

BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.

Manufacturing sector productivity rose 6.6 percent in the fourth quarter of 2009, as output increased 5.5 percent and hours decreased 1.0 percent. Productivity grew 6.8 percent in the durable goods industries and 6.4 percent in the nondurable goods industries. Over the last four quarters, manufacturing productivity increased 6.1 percent as output declined 4.6 percent and hours worked fell 10.1 percent. Unit labor costs in manufacturing declined 6.3 percent in the fourth quarter of 2009 and decreased 4.7 percent over the last four quarters.