U.S. Worker Productivity Fell by 0.9% in First Quarter

worker productivity apathyBy MARTIN CRUTSINGER

WASHINGTON -- U.S. worker productivity fell by the largest amount in a year from January through March. The steeper drop than first estimated suggests companies would need to hire more if demand were to pick up.

The Labor Department said Wednesday that productivity fell at an annual rate of 0.9% in the first quarter. That's faster than the 0.5% annual decline first estimated last month.

Labor costs rose 1.3%, down from an initial estimate of 2%. Compensation costs were smaller.

Productivity is the amount of output per hour of work. It fell at a faster rate than first estimated because revisions showed less output and slightly more hours worked.

The report was the government's second and final look at first-quarter productivity.

Last week, the government said the economy grew at an annual rate of 1.9% in the January-March quarter, slightly slower than its initial estimate of 2.2%.

A decline in productivity could be good news for job seekers. It could show that companies are struggling to squeeze more output from their workers and must hire if demand rises.

But so far, companies have signaled a much different message. Employers added just 69,000 jobs in May, the fewest in a year, and just 77,000 in April. That's a sharp decline from the 226,000 jobs created per month in the first quarter.

"Going forward, the big question is the rate of gain in output growth. If it remains slow, as we feel likely, productivity gains will continue to be constrained," said Joshua Shapiro, chief U.S. economist at MFR Inc.

Productivity grew last year at the slowest pace in nearly a quarter century after rising sharply in 2010. The main reason productivity soared in 2010 was that it followed the worst recession in decades, when employers laid off millions of workers.

Economists said the trend is typical during and after a recession. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.

Economists expect productivity growth will remain weak this year. Economists at JPMorgan (JPM) are forecasting productivity will rise 0.7% this year as companies add more workers.

With so many people out of work and looking for jobs, there is little chance that wage pressure will get out of hand, economists note.

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Interesting article today on a Forbes 400 billionaire investing in PGLC.


June 07 2012 at 2:17 PM Report abuse -1 rate up rate down Reply

When employers cut production (as they do during a recession), they typically lay off or cut the hours of their least productive employees, plant, and equipment. Productivity thus generally increases during a recession. Conversely, as a recession ends, less-skilled employees are hired (or given more hours) and production of less efficient plants and equipment is used to produce the incremental goods. Thus, productivity generally decreases as the economy works out of recession. This is nothing new ... it's basic neoclassical, marginal utility, productivity factor, economics from 125 years ago, at least.

June 07 2012 at 9:16 AM Report abuse -1 rate up rate down Reply

More bad news for job seekers.

Before employers hire, they will seek increased productivity. That means possibly laying off some workers to get more out of the ones that remain.

Even before they hire temp or part-time workers, they will seek to get productivity up ... and when they do, there is no incentive for hiring new permanent employees.

Until Obama is replaced by Romney (and Obamacare is dismantled) this economy is going nowhere.

June 07 2012 at 2:05 AM Report abuse +3 rate up rate down Reply

Evan won't post on this board. It's about work and productivity. Something Evan knows nothing about.

June 06 2012 at 9:51 PM Report abuse +3 rate up rate down Reply

Working had is great for personal goals, but doesn't necessary mean much in work terms.
We need to get back to hard work, and small businesses.


June 06 2012 at 2:32 PM Report abuse rate up rate down Reply

what ever happend to just working hard ,

June 06 2012 at 1:52 PM Report abuse rate up rate down Reply

Same work load and fewer active employees??/ Seems that many are laid off due to this Occupants Health Care cost????

June 06 2012 at 12:13 PM Report abuse +5 rate up rate down Reply

The silent revolt of the working poor is starting.More for less as you pocket the difference only works for a short time.Lack of demand equates to lack of disposable income.1% see 90% of wage gains,profits are at historic levels,and they sit on 2 Trillion in domestic reserves.They can write checks to buy elections without blinking an eye but wages stagnate.Raise dividends,repurchase stock,and hand the money out in low tax income to yourselves as those that produce and pay loose more.

June 06 2012 at 11:26 AM Report abuse -2 rate up rate down Reply