Worker Productivity Falls at Its Fastest Pace in a Year

Posted by Unknown on Wednesday, May 7, 2014

Economy |Worker Productivity Falls at Its Fastest Pace in a Year

WASHINGTON — Worker productivity fell at its fastest pace in a year in the first quarter as harsh winter weather restrained output, leading to a jump in labor-related production costs.

The drop in productivity, which mirrored a sharp decline in economic growth, is temporary, and Federal Reserve officials are likely to shrug off the spike in labor costs, analysts said.

“Weather impacts are temporary, and as such, we should see productivity growth rebound substantially in the second quarter as economic growth strengthens,” said Sam Bullard, a senior economist at Wells Fargo Securities.

Productivity declined at a 1.7 percent annual rate, the biggest drop since the first quarter of 2013, the Labor Department said on Wednesday.

Productivity, which measures hourly output per worker, advanced at a 2.3 percent pace in the fourth quarter. Economists had expected it to fall at a rate of only 1 percent in the first three months of the year.

Compared with the first quarter of 2013, productivity increased 1.4 percent. Workers put in more hours in the first quarter, but falling output caused labor costs to rise.

Unit labor costs, the price of labor per single unit of output, surged at a 4.2 percent rate after falling at a 0.4 percent rate in the fourth quarter. Economists had expected unit labor costs to increase at a 2.6 percent rate. Unit labor costs rose only 0.9 percent compared to the first quarter of 2013.

Separately, consumer credit recorded its largest increase in a year in March, bolstered by growing demand for student loans and household borrowing to buy automobiles.

Total consumer credit increased by $17.5 billion, to $3.1 trillion, the Federal Reserve said on Wednesday. That was the largest rise since February 2013.

February’s consumer credit figure was revised lower to show a $12.9 billion increase rather than the previously reported $16.5 billion advance.

Revolving credit, which mostly measures credit card use, rebounded by $1.1 billion after falling by a revised $2.7 billion in February.

Nonrevolving credit rose $16.4 billion in March.