US worker productivity slumped again in Q1

WASHINGTON (AP) — American workers were less productive again in the January-March quarter, although the decline wasn't as severe as first thought. Meanwhile, labor costs climbed at a faster pace than initially estimated.

The Labor Department said today that productivity declined at an annual rate of 0.6 percent in the first quarter after a 1.7 percent drop in the fourth quarter. The government first estimated that productivity fell at a 1 percent rate. Labor costs for employers rose at a 4.5 percent rate in the first quarter, even faster than the 4.1 percent gain first reported.

Productivity has been weak for the past five years, a troubling development since productivity growth is the key factor that pushes up living standards. The rise in labor costs indicates that worker pay is finally climbing after an extended period of weak wage growth.

Blerina Uruci, an economist with Barclays Research, said she forecasts only modest productivity growth in the coming years, with "limited scope for an imminent return" to the stronger productivity gains that were occurring before the 2007-2009 recession.