U.S. productivity grew at a strong 3.4% rate in the January-March quarter, the best showing in more than four years, the Labor Department reported Thursday. It was an encouraging sign that productivity may finally be improving after a long stretch of weakness.
The first quarter gain was more than double the 1.3% increase in the fourth quarter, although it was slightly lower than an initial estimate of 3.6% made a month ago. Labor costs fell during the first quarter, declining by 1.6% following a 0.4% drop in the fourth quarter.
Productivity, the amount of output per hour of work, is a key factor determining an economy’s growth potential. If the current rebound continues, it would provide support for President Donald Trump’s efforts to achieve sustained 3% growth rates.
The slight downward revision in productivity reflected the fact that overall output, as measured by gross domestic product, was revised down from an initial estimate of 3.2% growth to 3.1% growth in the first quarter.
The 3.4% advance in productivity was the strongest increase since a 3.7% rise in the third quarter of 2014. Productivity has risen 2.4% over the past four quarters, the best performance since a 2.7% four-quarter gain in 2010.