US productivity falls at 0.9% rate in first quarter

WASHINGTON (AP) — U.S. productivity fell at a 0.9% rate in the first three months of this year, a smaller decline than first estimated, while labor costs rose at a slightly faster pace.

The Labor Department reported Thursday that the first-quarter decline in productivity was smaller than the initial estimate a month ago of a 2.5% drop. Labor costs rose at a 5.1% rate, slightly faster than the 4.8% increase first reported.

Productivity, the amount of output per hour of work, has lagged over the past decade, a troubling development that economists have been unable to adequately explain. Productivity is the key to rising living standards, and the slow pace of growth in recent years has been a major reason that wage gains have lagged.

The revision to the productivity figures followed last week’s revised data on the performance of the gross domestic product, the economy’s total output of goods and services. The government said GDP fell at an annual rate of 5% in the first quarter, slightly worse than the 4.8% decline that was estimated a month ago.


While the first-quarter revision in productivity was stronger than many economists had expected, they cautioned that the economic disruptions caused by the coronavirus would likely keep productivity at sub-par levels in coming quarters.

“The underlying trend in productivity will likely weaken in the near term in response to weak output,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said.

The 0.9% rate of decline in productivity in the January-March quarter followed 1.2% increase in the October-December quarter of last year. For all of 2019, productivity rose 1.9%, a slight improvement from 1.4% gain in 2018.

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