US productivity drops most since 1947, driving up labour costs

Nonfarm productiveness, measuring hourly output per employee, plunged at a 7.5 % annualised charge final quarter, the Labor Division says.

US productiveness has been risky for the reason that begin of the COVID-19 pandemic greater than two years in the past [File: Luke Sharrett/Bloomberg]

US employee productiveness fell at its steepest tempo since 1947 within the first quarter, whereas development in unit labour prices accelerated, indicating that rising wage pressures will proceed contributing to retaining inflation elevated for some time.

Nonfarm productiveness, which measures hourly output per employee, plunged at a 7.5 % annualised charge final quarter, the deepest for the reason that third quarter of 1947, the Labor Division mentioned on Thursday. Knowledge for the fourth quarter was revised barely decrease to indicate productiveness rising at a 6.3 % charge as a substitute of the beforehand reported 6.6 % tempo.

Economists polled by Reuters information company had anticipated productiveness would drop at a 5.4 % tempo. The decline was flagged in final week’s first-quarter gross home product (GDP) report, which confirmed the financial system contracting at a 1.4 % charge within the January-March interval.

Productiveness fell at a 0.6 % tempo from a yr in the past. It has been risky for the reason that begin of the COVID-19 pandemic greater than two years in the past.

Hours labored elevated at a 5.5 % charge within the first quarter after rising at a 2.5 % tempo within the fourth quarter.

Unit labour prices – the worth of labour per single unit of output – shot up at an 11.6 % charge. That adopted a 1 % development tempo within the October-December quarter. Final quarter’s soar probably exaggerates the tempo of development in labour prices.

Unit labour prices elevated at a 7.2 % charge from a yr in the past. The surge in prices adopted on the heels of a authorities report final week, exhibiting that compensation for American employees notched its largest enhance in additional than three many years within the first quarter amid a persistent labour scarcity.

There have been a file 11.5 million job openings on the finish of March. The Federal Reserve on Wednesday raised its coverage rate of interest by half a share level, the largest hike in 22 years, and mentioned the US central financial institution would start trimming its bond holdings subsequent month because it battles sky-high inflation. Fed Chair Jerome Powell informed reporters that “the labour market is extraordinarily tight, and inflation is way too excessive”.

Hourly compensation rose at a 3.2 % charge within the first quarter after rising at a 7.4 % tempo within the fourth quarter. Compensation elevated at a 6.5 % charge in contrast with the primary quarter of 2021.