U.S. Labor Productivity Tumbles 3.2% In Q1 Amid Drop In Output

(RTTNews) - Labor productivity in the U.S. fell by much more than previously estimated in the first quarter, according to a report released by the Labor Department on Wednesday, with the rough winter weather negatively impacting output.

The report said productivity tumbled by a revised 3.2 percent in the first quarter compared to the previously reported 1.7 percent drop. Economists had expected productivity to fall by a revised 2.9 percent.

The much steeper than previously estimated drop in productivity, a measure of output per hour, came as the change in output was revised to show a notable decrease.

Revised data showed that output fell by 1.1 percent in the first quarter compared to the previously estimated 0.3 percent uptick.

The report also showed that hours worked increased by an upwardly revised 2.2 percent versus the previously reported 2.0 percent growth.

The steep drop in productivity in the first quarter compares to the 2.3 percent increase in the fourth quarter, which reflected a 3.8 percent jump in output and a 1.4 percent increase in hours worked.

Partly reflecting the bigger than previously estimated drop in productivity, the Labor Department also said unit labor costs surged up by an upwardly revised 5.7 percent in the first quarter versus the previously reported 4.2 percent jump.

Costs had been expected to increase by a revised 5.2 percent compared to the 0.6 percent decrease seen in the fourth quarter.

The rebound in labor costs in the first quarter reflected the drop in productivity as well as a 2.3 percent increase in hourly compensation. Hourly compensation rose by 1.7 percent in the fourth quarter.

Real hourly compensation, which takes changes in consumer prices into account, rose by 0.4 percent in the first quarter after climbing by 0.5 percent in the fourth quarter.

Peter Boockvar, managing director at the Lindsey Group, said, "With the unemployment rate getting closer to 6%, productivity needs to start accelerating or else unit labor costs will continue to trend higher as the labor force tightens up."

Compared to the same quarter a year ago, productivity rose by 1.0 percent in the first quarter, as output and hours worked increased by 2.8 percent and 1.7 percent, respectively.

Unit labor costs were up by 1.2 percent year-over-year amid a 2.3 percent increase in hourly compensation.