The unemployment rate rose to 4.8% in January and wages increased by only 0.1%, dampening hopes for a March interest rate hike.
The broader trend remains weak, with productivity rising just 0.2% in 2016 from 2015, the smallest annual gain since 2011.
The Fed’s preferred measure of inflation rose 1.6% in December from a year earlier, its highest level since September 2014.
Growth eased from 3.5% in Q3 as a sharp drop in exports offset solid consumer spending and a pickup in business investment.
The Conference Board's index of leading economic indicators rose 0.5% in December, it's largest jump since April 2016.
But the agency also sees the deficit reaching $1.4 trillion, or 5% of GDP, by 2027, driving debt held by the public to the highest level since 1947.
Sales picked up momentum after a slow start to the holiday season, bringing the gain for all of 2016 to 3.3%.
The increase in the first week of 2017 was more than expected but claims "remain in a very constructive range."
Average hourly wages rose 2.9% in December, suggesting the economic recovery is finally translating into gains for workers.
“The level of claims is consistent with ongoing improvement in U.S. labor markets," an economist says of the data for the week ended Dec. 31.