The FINANCIAL — U.S. worker productivity fell in the opening months of 2015, a confirmation of the poor start to the year for the economy, according to Nasdaq.
The productivity of nonfarm workers, measured as the output of goods and services per hour worked, decreased at a 3.1% seasonally adjusted annual rate in the first quarter, the Labor Department said on June 4. From a year earlier, productivity was up 0.3%.
Economists surveyed by The Wall Street Journal had forecast a 3% decline from the prior quarter.
Productivity dropped in the first quarter as output decreased at a 1.6% pace and hours worked rose at a 1.6% rate.
A gauge of compensation costs, unit labor costs, increased at a 6.7% annual rate in the first three months of the year.
Economists had expected a 6% rise.
From a year earlier, unit labor costs rose 1.8%.
Productivity data can be volatile from quarter to quarter and are often heavily revised. In a report last month, the Labor Department said first-quarter productivity declined 1.9% and unit labor costs rose 5%.
While the statistics have shortcomings, overall trends have been unimpressive.
Productivity has now fallen for two consecutive quarters, the first time that has happened since 2006.
More broadly, productivity has been trending lower for years. That may be one reason overall economic growth has been constrained and wage growth tepid. Strong productivity gains can underpin corporate profit, allow more business investment and support higher wages.
“The most important factor determining living standards is productivity growth, defined as increases in how much can be produced in an hour of work,” Federal Reserve Chairwoman Janet Yellen said in a speech last month. “Over time, sustained increases in productivity are necessary to support rising incomes.”
Productivity data since the recession has been “disappointing,” Ms. Yellen said, though the cause is open to debate. One possible factor may be the recession, which pushed firms to slash spending on equipment, and research and development.
“As the economy strengthens further, many of these processes could work in reverse, boosting our productivity prospects,” Ms. Yellen said.
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