US productivity growth unrevised at 5.4% rate in Q1

Business

FILE – In this Thursday, April 22, 2021 file photo, Marie Tibbott sorts product at EIP Manufacturing in Earlville, Iowa. Growth in U.S. manufacturing picked up in May, even as supply chain problems persist and businesses continue to struggle to find workers. The Institute for Supply Management, a trade group of purchasing managers, said Tuesday, June 1 that its index of manufacturing activity rose in May to a reading of 61.2 from 60.7 in April. (Jessica Reilly/Telegraph Herald via AP, File)

WASHINGTON (AP) — U.S. productivity growth was unrevised at a 5.4% rate in the first three months of the year, though recent increases in labor costs accelerated.

The first quarter gain in productivity was unchanged from the initial estimate a month ago, the Labor Department reported Thursday. The 5.4% gain at a seasonally adjusted annual rate followed a steep plunge at a 3.8% rate in the fourth quarter.

Labor costs rose at a 1.7% rate in the first quarter, up from the initial estimate that labor costs had fallen 0.3% in the first quarter.

Productivity, the amount of output per hour of work, turned in weak gains over the record-long economic expansion that ended with the pandemic-triggered recession last year.

Economists are hoping that some of the efficiencies businesses have implemented to cope with the pandemic may lead to stronger productivity gains in the future.

Lydia Boussour, the lead U.S. economist at Oxford Economics, said she believed a number of factors stemming from the impact of the pandemic would generate stronger productivity growth in the post-COVID-19 era. “These factors include a strong investment cycle, increased business dynamism, faster technology adoption and lasting remote work,” she said.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said she expected stronger productivity gains initially as businesses increase their production at a faster pace than they rehire all the workers who have been laid off.

“But gains will likely moderate as the recovery progresses and low-productivity jobs are recovered,” she said.

The 5.4% increase in productivity in the first quarter was an improvement from modest annual gains in productivity of 2.5% last year and 1.8% in 2019.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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