The productivity of U.S. workers dipped again in the first quarter, possibly reflecting the influx of new hires as companies built up their workforces in the wake of the recession.
Nonfarm business sector labor productivity, as measured by the average worker’s output per hour, decreased at a 1% seasonally adjusted annual rate in the first quarter, the Labor Department said Wednesday. From a year earlier, output was up 0.6%.
Economists surveyed by The Wall Street Journal had forecast a 1.4% decline from the prior quarter.
The latest data showed the fourth decline in productivity in the past six quarters. Over the past five decades, output has grown at an average annual rate of 2%.
“Much of the recent extreme weakness in productivity probably is owed to hangover effects from companies’ deep job and capital-spending cuts in the wake of the recession,” the WSJ said in another article. “It is a hangover that could persist for some time.”
Many of the people companies are now hiring, the Journal reported, are returning to work after long periods of unemployment or, in the case of many young people, never having worked.
“Eventually, recently hired workers will become more seasoned, and productive,” the WSJ predicted. “And eventually, companies may step up their spending on labor-saving tech equipment — and provide technology companies with stronger incentives to innovate.”
The Labor Department also reported Wednesday that unit labor costs increased at a 4.1% annual rate — the sharpest rise in more than a year and well ahead of the 3.3% increase economists expected. From a year earlier, labor costs rose 2.3%.
“To respond to even incremental increases in demand, companies have had to step up hiring,” the WSJ said. “That may be why job growth has been strong even as the economy has grown slowly. And it is why labor costs have been going up, putting the squeeze on profit margins.”
According to ADP, private sector employers added 156,000 jobs in April, the smallest gain in three years. “Employers may be tapping the brakes on hiring amid slow economic growth,” Investor’s Business Daily said.