U.S. productivity slumps in first quarter
MARKETWATCH 8:41 AM ET 5/4/2017
The 0.6% decline in U.S. productivity is the biggest in a year
WASHINGTON (MarketWatch) --The productivity of American firms and their employees fell in the first quarter at the fastest rate in a year, reflecting a cutback in the amount of goods and services made available to customers.
U.S. productivity -- the key to a higher standard of living -- declined at a 0.6% annual pace in the first three months of 2017, the government said Thursday. Economists polled by MarketWatch had forecast no change.
In premarket trading, futures pointed to a higher opening for the Dow Jones Industrial Average
The decline in productivity from the fourth quarter's revised 1.8% clip mostly stemmed from a lower tempo at many businesses. Companies sought to reduce inventory levels to avoid getting stuck with unsold goods or products they'd have to discount steeply to move.
The increase in output, or how many goods and services companies produce, rose just 1% after a 2.7% gain in the fourth quarter.
Yet worker put in even more time on the job. Hours worked increased 1.6%.
The combination of slower production and higher hours cause unit-labor costs to rise to a 3% rate from 1.3% at the end of 2016.
The closely follow measure shows how much it costs a business to produce one unit of output, such as a ton of steel, a crate of toys or a bushel of corn. Labor costs rose in 2016 at the fastest clip in nine years, a sign companies have to pay more to employees at a time when a shrinking pool of available workers makes good help harder to find.
Productivity, for its part, increases when workers generate more goods and services in the same amount of time. Yet productivity has been weak since an economic recovery began almost eight years ago, increasing at 1.2% annual clip since 2007.
That's well below the 2.1% average since World War Two or the 2.6% average from 2000 to 2007.
The slowdown in productivity has broad ramifications for the U.S. economy. Pay rises more slowly, for example, and that makes it harder for American families to dramatically improve their economic circumstances as was often the case in the half century after World War Two.
Some economists suggest a tightening labor market could spur companies to invest more in labor-saving devices or technology that boosts productivity, but so far there's little evident to support such a shift.
All figures reflect seasonally adjusted annual rates.
-Jeffry Bartash; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
05-04-170841ET
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