WASHINGTON, Feb. 6 (UPI) -- Labor costs dropped 1.6 percent in the fourth quarter as gains in productivity outpaced gains in compensation, the U.S. Department of Labor said Thursday.
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.