WASHINGTON (AP) – American workers were less productive again in the January-March quarter, although the decline wasn’t as severe as first thought. Meanwhile, labor costs climbed at a faster pace than initially estimated.
The Labor Department said Tuesday that productivity declined at an annual rate of 0.6 percent in the first quarter after a 1.7 percent drop in the fourth quarter. The government first estimated that productivity fell at a 1 percent rate. Labor costs for employers rose at a 4.5 percent rate in the first quarter, even faster than the 4.1 percent gain first reported.
Productivity has been weak for the past five years, a troubling development since productivity growth is the key factor that pushes up living standards. The rise in labor costs indicates that worker pay is finally climbing after an extended period of weak wage growth.
Fed Reserve Chair Janet Yellen said Monday that lackluster productivity gains represented a key uncertainty facing the economy. Productivity growth has been unusually weak over the past five years, averaging just 0.5 percent per year, just one-third of the annual gains seen from 1970 to 1990, she said.
While some economists are pessimistic about the prospects for productivity in the coming years, Yellen remains “cautiously optimistic” as the adverse effects of the Great Recession on investment spending and research begin to fade.