US productivity growth unrevised at 5.4% rate in Q1

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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.

Martin Crutsinger, The Associated Press

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