US Productivity Fell in Q1

U.S. worker productivity unexpectedly fell in the first quarter, leading to a jump in labor-related costs.

The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, decreased at a 0.6 percent annualized rate.

That was the weakest in a year and followed an upwardly revised 1.8 percent pace of increase in the fourth quarter.

The weakness in productivity is in line with a near stall in economic growth at the start of the year. Economists polled by Reuters had forecast productivity unchanged in the first quarter after a previously reported 1.3 percent growth rate in the prior quarter.

Compared to the first quarter of 2016, productivity increased at a 1.1 percent rate, suggesting a gradual improvement in the productivity trend.

Productivity has increased at an average annual rate of 0.6 percent over the last five years, well below its long-term rate of 2.1 percent from 1947 to 2016.

Weak productivity could make it difficult to boost annual economic growth to 4 percent as President Donald Trump has promised. The government reported last week that gross domestic product increased at a 0.7 percent rate in the first quarter, the worst performance in three years.

Some economists believe productivity is being inaccurately measured, especially on the information technology side.

Others blame low capital expenditure, which they say has resulted in a sharp drop in the capital-to-labor ratio.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza