US productivity slows sharply in first quarter
2024.05.02 09:25
WASHINGTON (Reuters) – U.S. worker productivity growth slowed sharply in the first quarter, resulting in a surge in labor costs, but the trend in productivity remained solid.
Nonfarm productivity, which measures hourly output per worker, increased at a 0.3% annualized rate last quarter after rising at a 3.5% pace in the October-December period, the Labor Department’s Bureau of Labor Statistics said on Thursday.
The government on Friday corrected productivity data from 2019 through 2023 due to a computation error.
Economists polled by Reuters had forecast productivity would increase at a 0.8% rate.
Productivity advanced at a 2.9% pace from a year ago. Economists are keeping an eye on productivity to gauge how quickly labor costs can rise without re-igniting inflation. Labor costs and inflation surged in the first quarter.
The Federal Reserve on Wednesday kept its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
Fed Chair Jerome Powell told reporters that “in recent months, inflation has shown a lack of further progress toward our 2% objective.” Since March 2022 the U.S. central bank has raised its policy rate by 525 basis points.
Unit labor costs – the price of labor per single unit of output – jumped to a 4.7% rate in the January-March quarter after being unchanged in the prior quarter. Labor costs increased at a 1.8% pace from a year ago.
Compensation shot up at a 5.0% rate last quarter after rising at a 3.5% pace in the October-December quarter. It increased at 4.7% rate from a year ago.
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