You are here

US productivity contracts 0.6% in first quarter

38595020 - 03_06_2016 - FLORIDA ORANGE JUICE.jpg
US nonfarm productivity fell less sharply than previously thought in the first quarter, but labour-related costs still surged as companies employed more workers to boost output.

[WASHINGTON] US nonfarm productivity fell less sharply than previously thought in the first quarter, but labour-related costs still surged as companies employed more workers to boost output.

The Labour Department said on Tuesday productivity, which measures hourly output per worker, contracted at an annualized rate of 0.6 per cent, instead of the 1.0 per cent pace reported last month. The revision, which reflected modestly higher output than previously estimated, was in line with economists' expectations.

Productivity fell at a 1.7 per cent rate in the fourth quarter. The government last month raised its first-quarter economic growth estimate to a 0.8 per cent rate from the 0.5 per cent pace reported in April.

Productivity, which has only increased in two of the last six quarters, rose at a 0.7 per cent rate compared to the first quarter of 2015.

The weakness in productivity partially explains the divergence between the economy's anaemic performance at the start of the year and a fairly strong labour market, marked by average monthly job gains of 196,000 in the first quarter.

Productivity increased at a annual rate of less than 1.0 per cent in each of the last five years. This suggests the economy's potential rate of growth has declined.

The increase in hours worked in the first quarter was unrevised at a 1.5 per cent rate.

Unit labour costs, the price of labour per single unit of output, increased at a revised 4.5 per cent pace. They were previously reported to have advanced at a 4.1 per cent rate. Fourth-quarter unit labour costs were revised to show a 5.4 per cent rate of increase, the fastest rate since the fourth quarter of 2014, instead of 2.7 per cent.

Despite the upward revision, the trend in labour cost increases remains moderate. Unit labour costs increased at a 3.0 per cent rate compared to the first quarter of 2015.

Hourly compensation per hour increased at an upwardly revised 3.9 per cent rate in the first quarter instead of the previously reported 3.0 per cent pace.

REUTERS