Productivity of U.S. workers increased more than forecast in the fourth quarter as companies reduced employees’ hours at the fastest pace in almost five years, Bloomberg reported.

The measure of employee efficiency climbed at an annual rate of 1.8 percent after a 6 percent pace in the third quarter, the Labor Department said today. The median forecast in a Bloomberg News survey was for a 0.5 percent gain. Labor costs increased less than forecast, the figures showed.

Businesses are cutting staff to control expenses as the economy sits on the verge of the first recession since 2001. That may help keep consumer prices in check, giving Federal Reserve policy makers more flexibility to lower interest rates, economists said.

The median forecast for productivity was based on 71 estimates in a Bloomberg News survey. Projections ranged from a drop of 0.6 percent to a gain of 2.7 percent.

Unit labor costs climbed 2.1 percent after falling 1.9 percent in the prior three months.

Hours worked decreased at a 1.5 percent pace, a second consecutive decline and the biggest since the first three months of 2003. Compensation for each hour worked rose at an annual rate of 3.9 percent, compared with a 4 percent gain the prior quarter. Productivity for all of 2007 increased 1.6 percent after rising 1 percent the previous year. Labor costs climbed 3.1 percent, the most since 2000.