U.S. productivity fell in the first quarter of the year while labor costs rose, the government said Wednesday.
The Labor Department reported that productivity declined at an annual rate of 1.7 percent in the January-March period, after growing at a 2.3 percent rate in last year’s fourth quarter.
The falling productivity coupled with a slight increase in hourly compensation led to labor costs rising 4.2 percent in the first quarter. Labor costs had fallen in the previous two quarters.
Economic growth stalled in the first three months of this year, increasing just 0.1 percent, according to initial estimated by the Commerce Department. Freezing temperatures and snow storms disrupted growth. Retail sales and factory output plunged in January, only to recover as the weather warmed.
Productivity measures output per hour of work. Greater productivity should raise living standards because it enables companies to pay their workers more without having to increase prices, which could boost inflation.
Despite the increase in labor costs last quarter, overall inflation remains mild.