US productivity dropped at 3.2 per cent rate in first quarter while labour costs rose faster

WASHINGTON – U.S. productivity fell even more than previously thought in the January-March period while labour costs rose at a faster pace.

The Labor Department says productivity, the amount of output per hour of work, declined at an annual rate of 3.2 per cent in the first quarter, the weakest showing since the beginning months of the recession in 2008. Unit labour costs rose at a 5.7 per cent rate, the fastest pace in more than a year.

Rising labour costs and falling productivity can be a cause for concern if they are an indication that inflation is worsening. But the first quarter performance was seen as a temporary bump caused by an unusually harsh winter which caused the economy to go into reverse. A strong rebound is expected in the current quarter.