U.S. worker productivity rebounded in the first quarter, depressing labor costs growth, but the data has been severely distorted by the COVID-19 pandemic to provide a clear trend.
The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, increased at a 5.4% annualized rate last quarter. Data for the fourth quarter was revised higher to show productivity falling at a 3.8% rate instead of the previously reported 4.2% pace.
Economists polled by Reuters had expected productivity would rebound at a 4.3% rate. Productivity shot up early in the pandemic before slumping in the final three months of 2020. Economists attributed the surge to the hollowing out of lower-wage industries, like leisure and hospitality, which they said tended to be less productive.
Compared to the first quarter of 2020, productivity rose at a 4.1% pace. Hours worked increased at a 2.9% rate last quarter, slowing from a 10.0% growth pace in the October-December period.
Unit labor costs – the price of labor per single unit of output – fell at a 0.3% rate. They grew at a 5.6% pace in the fourth quarter. Unit labor costs increased at a 1.6% rate from a year ago. They have also been distorted by the pandemic’s disproportionate impact on lower-wage industries.
Hourly compensation rose at a 5.1% rate last quarter. That followed a 1.6% growth pace in the fourth quarter. Compensation increased at a 5.8% rate compared to the first quarter of 2020.