That is not quite what the news reports said, but it's close. Several news accounts (e.g. the WSJ and AP) noted the 1.8 percent rate of productivity growth in the fourth quarter, and pronounced it as good news. The growth rate was in fact stronger than the 0.0 - 0.5 percent range that most economists had expected. However, the problem is that the faster than expected rate of productivity growth is attributable to fact that hours worked fell at a 1.5 percent annual rate for the quarter. This is the second consecutive reported drop in quarterly hours. Since 1970, we have only seen two consecutive quarters of declining hours when the economy was entering or leaving a recession.
--Dean Baker
