U.S. business productivity rose at a slower-than-expected pace in the fourth quarter, while jobless claims rose unexpectedly last week, according to two reports released this morning.

Non-farm business productivity, or worker output per hour, increased at a 2.7% annual rate in the final three months of the year after an upwardly revised 9.5% pace in the previous quarter, the Labor Department said.

The advance was the slowest since a 1.5% gain in the final quarter of 2002 and was lower than the 3% clip expected by analysts.

“While the productivity results are not a huge surprise, the labour input side of the report offers some interesting tidbits of information. Hours worked finally rose in the fourth quarter, after consistently falling for the first three quarters of the year. This together with other sentiment reports suggest there is some evidence of an improving labour market,” RBC Financial says.

“Also interestingly, unit labour costs fell for the third straight quarter as real hourly compensation rose just 0.5%, even slower than the third quarter’s pace. Falling unit labour costs are positive for the economy’s outlook since as these costs fall, labour will become more attractive to firms, increasing the likelihood that they will be added to the production mix. Falling labour costs also explain why profit margins have been able to successfully expand in the face of rising raw material costs and is central to explaining why inflation growth has remained muted.”

The Labor Department said separately that claims for state unemployment aid rose 17,000 to 356,000 in the week ended Jan. 31 from a revised 339,000 in the previous week

Economists were expecting claims to fall. “This jump, however, is small and is irrelevant for tomorrow’s payroll report,” BMO Nesbitt Burns insists. “Between the survey weeks, claims fell 12,000 and the number receiving benefits dropped 111,000, suggesting a possible reduction in the unemployment rate tomorrow. The trend remained locked at 345,000 lately, a level consistent with moderate job growth.”

RBC says that the increase can be explained in part by layoffs related to recent winter storms.

There was more positive news from major U.S. retailers. Wal-Mart Stores Inc. and other U.S. retailers on reported surprisingly robust January sales, driven by demand for cold-weather garb as temperatures in the Northeast and Midwest dropped to near-record lows.

Wal-Mart, said January same-store sales, or sales at U.S. stores open at least a year, rose 5.7% ahead of its forecast for 3% to 5% growth.