U.S. productivity flat in first quarter; labor costs up

WASHINGTON -- The productivity of American workers was flat in the first three months of this year, while labor costs rose at the fastest pace since the second quarter of last year.

Productivity growth was zero in the January-to-March quarter after rising at a 1.8 percent annual rate in the fourth quarter, the Labor Department reported Monday.

It was the weakest performance since productivity had fallen at a 0.1 percent rate in the second quarter of last year but an improvement from an initial reading of a 0.6 percent decline.

Productivity, the amount of output per hour of work, has been weak through most of the recovery. Many analysts believe finding a way to boost productivity growth is the biggest economic challenge facing the country, but there is no consensus on the cause of the slowdown.

Labor costs rose at a 2.2 percent rate after having fallen at a 4.6 percent rate in the fourth quarter. It was the fastest gain since April-to-June of last year.

The revision in first quarter productivity had been expected because of the revision to first quarter gross domestic product, the economy's total output of goods and services.

The government initially reported GDP had risen by a tepid 0.7 percent rate in the January-to-March perio. But that was revised to show a slightly better reading of a 1.2 percent gain. The boost in output led to the better reading for productivity.

Since 2007, productivity increases have averaged just 1.2 percent.

That's less than half the 2.6 percent average annual gains turned in from 2000 to 2007, when the country was benefiting from increased efficiency from greater integration of computers and the internet into the workplace.