U.S. productivity takes sharp fall
WASHINGTON — The productivity of American workers fell in the first quarter by the sharpest amount in a year, while labor costs increased.
Productivity declined at an annual rate of 0.6 percent in the January-March quarter after rising at a 1.8 percent rate in the fourth quarter, the Labor Department reported Thursday.
Labor costs rose at a 3 percent rate, up from a 1.3 percent rate of increase in the fourth quarter.
Productivity, the amount of output per hour of work, has been weak for a decade through most of the current recovery. Many analysts believe it is the biggest economic challenge facing the country, but there is no consensus on the cause of the slowdown.
The weak performance for productivity had been expected given that overall output, as measured by the gross domestic product, slowed to a weak annual gain of just 0.7 percent in the first quarter. It was the slowest performance in three years.
Rising productivity means increased output for each hour of work, which allows employers to boost wages without triggering higher inflation. Federal Reserve Chair Janet Yellen has pointed to the slowdown in productivity as a key concern.
Also Thursday, the Commerce Department reported that factory orders edged up just 0.2 percent in March, a significant slowdown from February’s gain of 1.2 percent.
The Commerce Department also reported that the U.S. trade deficit narrowed in March to the lowest level since October as both exports and imports fell. But the politically sensitive trade gap with China rose.
The gap in goods and services slipped to $43.7 billion, down from $43.8 billion in February. Exports dropped 0.9 percent to $191 billion, pulled down by falling auto exports. Imports fell 0.7 percent $234.7 billion as imports of crude oil and other petroleum products slid.
The trade deficit in goods with China rose to $24.6 billion in March from $23 billion in February amid rising imports of Chinese cellphones and telecommunications equipment.
On Wall Street Thursday, oil prices and energy companies plunged, but other stocks didn’t move much as investors waited for more signs about the state of the economy.
The government will release its monthly jobs report Friday morning.