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A worker welds metal components on a round baler at New Holland Ltd.'s Haytools assembly plant. in New Holland, Pennsylvania.
Luke Sharrett | Bloomberg | Getty Images
US worker productivity rose at its fastest pace in more than four years in the first quarter, reducing labor costs and suggesting that inflation could remain moderate for some time.
The Labor Department said Thursday that non-farm productivity, which measures hourly output per worker, had increased 3.6% annualized in the last quarter. This was the strongest pace since the third quarter of 2014.
Fourth quarter data were revised downward to show that productivity increased by 1.3% instead of the previously announced 1.9%.
Economists polled by Reuters had forecast that productivity in the first quarter would grow by 2.2%.
The acceleration in productivity was dampened by the sharp increase in gross domestic product between January and March.
The economy grew 3.2% in the first three months of the year, after growing 2.2% in the fourth quarter.
The trend of productivity is improving. Compared to the first quarter of 2018, productivity increased 2.4%, the best performance since the third quarter of 2010.
The sustained pace of productivity has dampened the growth in labor costs, which could boost corporate profits. Unit labor costs, the price of labor per unit of output, fell 0.9% in the first quarter, following a 2.5% increase in the previous quarter.
Compared to the first quarter of 2018, labor costs increased by 0.1%, the lowest pace since the fourth quarter of 2013. A low unit cost of labor was Work followed a report released Tuesday that wages have increased labor market tightening.
On Wednesday, the Federal Reserve kept interest rates steady and showed no desire to adjust them anytime soon. Fed Chairman Jerome Powell told reporters that the moderation of price pressure was probably due to transitory factors, and that inflation would return to the 2% target of the US central bank. A key measure of inflation followed by the Fed rose 1.6% in March over the previous year, the smallest gain in 14 months.
In the first quarter, hourly compensation increased 2.6%, down from the strong pace of 3.9% in the fourth quarter. Hourly pay increased by 2.5% compared to the first quarter of 2018.
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