U.S. productivity falls in first quarter

U.S. worker productivity fell by the largest amount in a year from January through March. The steeper drop than first estimated suggests companies would need to hire more if demand were to pick up.

The Labor Department said yesterday that productivity fell at an annual rate of 0.9 percent in the first quarter. That's faster than the initial 0.5 percent annual decline for the period estimated last month.

Productivity is the amount of output per hour of work. It fell at a faster rate than first estimated because revisions showed less output and slightly more hours worked.

Labor costs rose 1.3 percent in the January-March quarter, down from an initial estimate of 2 percent. The decline was largely due to smaller compensation costs.

The estimates were the government's second and final look at first-quarter productivity and labor costs. The faster decline in productivity was expected after the government said last week that the economy grew at an annual rate of 1.9 percent in the January-March quarter.

Less productivity is bad for corporate profits. But it could be good news for jobseekers. It could show that companies are struggling to squeeze more output from their workers and must hire if demand rises.

Yet so far, companies have signaled a much different message. Employers added just 69,000 jobs in May, the fewest in a year, and just 77,000 in April. That's a sharp decline from the 226,000 jobs created per month in the first quarter.