Productivity Slows in First Quarter

U.S. workers’ productivity slowed in the first quarter as employers hired more workers, the Labor Department said Thursday.

The 1.6% increase followed a 2.6% level in the fourth quarter. Productivity is a measure of how much an employee produces for every hour of work.

Economists had forecast a 1.1% increase, Bloomberg reported.  Labor costs rose 1% for the quarter, slightly higher than forecasts.

Among manufacturers, productivity increased at a 6.3% pace, pushing labor costs down by 3.5%. The fourth-quarter rate had been 5.9%.

When worker efficiency improves at a slower pace and labor becomes more expensive, companies may raise prices in order to guard their profits, contributing to more rapid inflation.