The productivity of American workers fell by 4.8% in the fourth quarter — the biggest decline in 39 years — as the coronavirus cast another dark shadow over the economy.
The decline in productivity in the final three months of 2020 capped off a chaotic year. Although productivity rose by 2.6% last year, it only did so because hours worked fell even faster than output.
Output, or the amount of goods and services produced, slid 4.2% in 2020. Hours worked sank by an even larger 6.6%.
Productivity is determined by the difference between output and hours worked.
Last year the pandemic destroyed millions of jobs and disrupted every walk of life, making it hard to take at face value the normal measures of the economy such as productivity. Analysts say it will take awhile for the economy to regain some sense of normalcy and render productivity data useful again.
In the fourth quarter, companies increased output by 5.3%, but hours worked tumbled at an annual 10.7% pace. Both are extremely high.
As a result, unit-labor costs jumped by a 6.8% annual pace in the fourth quarter. They rose by 4.3% for the full year, another extremely high number that reflects the distortions caused by the pandemic.
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