U.S. Labor Productivity Falls 1.9% In Q1, In Line With Estimates

(RTTNews) - Labor productivity in the U.S. showed another notable decrease in the first quarter of 2015, according to a report released by the Labor Department on Wednesday.

The report said labor productivity fell by 1.9 percent in the first quarter following a 2.1 percent decrease in the fourth quarter. The continued drop in productivity matched economist estimates.

A modest decrease in output contributed to the continued drop in productivity, which is a measure of output per hour.

The Labor Department said output edged down by 0.2 percent in the first quarter after climbing by 2.6 percent in the fourth quarter.

The pace of growth in hours worked slowed to 1.7 percent in the first quarter from 4.9 percent in the fourth quarter but still contributed to the drop in productivity.

Meanwhile, the Labor Department said unit labor costs surged up by 5.0 percent in the first quarter after jumping by 4.2 percent in the fourth quarter. Economists had expected costs to increase by 4.5 percent.

The bigger than expected increase in unit labor costs reflected the drop in productivity as well as sharp increase in hourly compensation, which jumped by 3.1 percent in the first quarter after rising by 1.9 percent in the fourth quarter.

Real hourly compensation, which takes changes in consumer prices into account, surged up by 6.2 percent in the first quarter following a 2.8 percent increase in the previous quarter.

However, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "Looking past the volatile quarterly numbers, U.S. labor productivity and unit labor costs remain soft, pointing to continued low inflation and possibly weaker job growth, neither of which will encourage the Fed to tap the brakes anytime soon."

Compared to the same quarter a year ago, productivity rose by 0.6 percent in the first quarter, as output climbed by 3.5 percent and hours worked increased by 2.9 percent.

Unit labor costs were up by 1.1 percent year-over-year in the first quarter amid a 1.7 increase in hourly compensation.