The numbers: U.S. productivity fell at a 2.7% annual clip in the first quarter, the government said Thursday.
Economists surveyed by the Wall Street Journal had projected a 1.9% decrease.
Over the past four quarters, U.S. productivity has fallen at a 0.9% pace.
Key details: Output in the first quarter rose 0.2%. Hours worked rose 3%.
U.S. real gross domestic product expanded at a 1.1% annual rate, down sharply from 2.6% growth in the fourth quarter.
Unit-labor costs, a key measure of wages, picked up to a 4.5% rate in the first quarter, up from a 3.3% rate in the prior three months. Over the past 12 months, unit labor costs are up 5.3%.
Big picture: Productivity is a key indicator because it is the basic ingredient of rising living standards. But it is tough to measure and economists like to look at longer-run trends. The work of discerning productivity trends was made even more difficult by COVID.
“Since the pandemic, the productivity numbers have been extremely volatile, as output growth and employment gains have been out of phase,” said Stephen Stanley, chief U.S. economist at Santander.
Economists are focusing a lot of attention on unit labor costs because economists wages are a key driver of inflation. Labor costs are running much faster than what would be consistent with price stability, suggesting that a Federal Reserve pause might be brief.
Market reaction: Stocks
DJIA,
SPX,
were set to open lower on Thursday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.59%.
