Productivity, defined as output per hour, rose at an annual rate of 3.2 percent in the quarter, the Bureau of Labor Statistics reported.
. Economists had predicted a gain of 2.5 percent.
Labor costs, in turn, dropped further than expected, falling 1.6 percent compared to the 0.5 percent drop economist had forecast.
The gain in productivity included a strong 4.9 percent gain in output and a 1.7 percent gain in hours worked.
The bureau said hourly compensation, the other contributing factor to labor costs, rose by 1.5 percent.
With a 3.2 percent gain in productivity and a smaller gain -- 1.5 percent -- in compensation, the cost of labor per unit of productivity went down.
The bureau said manufacturing productivity rose by 2 percent in the fourth quarter of 2013, as output rose by 6.6 percent and hours worked increased by 4.4 percent.
Productivity rose 3.4 percent for durable goods and 1 percent for non-durable goods, the bureau said.
In the fourth quarter, unit labor costs for the manufacturing sector fell 1 percent quarter to quarter. From the fourth quarter of 2012, unit labor costs dropped 0.9 percent, the bureau said.
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