US productivity growth slowed in early 2024

US WORKER productivity grew slightly less than previously estimated in the first quarter but exceeded market expectations, and unit labour costs rose by less than first thought, data from the Labor Department showed on Thursday (Jun 6), although the revision seems unlikely to allay Federal Reserve officials’ hesitance to turn to rate cuts in the near term.

Nonfarm productivity, which measures hourly output per worker, increased at a 0.2 per cent annualised rate in the first quarter, revised down from an initial estimate of 0.3 per cent one month ago. Economists polled by Reuters had estimated a revision down to 0.1 per cent.

Unit labour costs, meanwhile, rose at a 4 per cent annualised rate, down from the Bureau of Labor Statistics’ first estimate of 4.7 per cent. Economists had projected labour costs to be revised up to 4.9 per cent.

Productivity had accelerated and labour costs were subdued through much of 2023, finishing the year at 3.5 per cent and unchanged, respectively, in the fourth quarter. At the time, that had been seen as one of the arguments favouring rate cuts from the Fed this year as improved worker efficiency was hoped to further dampen inflation.

The near stalling of productivity in the first quarter did not further that cause, though some economists had cautioned after the initial BLS estimate was published last month that the data had been influenced by a seasonal quirk and that the trend of improving productivity may still hold up. REUTERS