Worker Output Drops by Most in Year, May Stoke More Hiring

Thursday, 03 May 2012 08:36 AM

 

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U.S. worker productivity fell from January through March by the most in a year.

The decline in productivity after lackluster output last year could be a positive sign for jobseekers. It could signal that companies are struggling to squeeze more from their work forces and must hire to meet rising demand.

The Labor Department said Thursday that productivity fell at an annual rate of 0.5 percent in the January-March quarter. It had increased at an annual rate of 1.2 percent in the previous quarter.

Labor costs rose at a rate of 2 percent during the first quarter, slightly slower than the 2.7 percent increase in the fourth quarter.

Productivity is the amount of output per hour of work. It grew last year at the slowest pace in nearly a quarter century after rising sharply in the previous year.

The main reason productivity soared in 2010 was that it followed the worst recession in decades, when employers laid off millions of workers.

Economists said the trend is typical during and after a recession. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force.

Once the economy starts to grow, demand rises and companies eventually reach a saturation point. Many employers must add more workers, if they want to grow.

Hiring slowed in March after a strong start this year. The economy added just 120,000 workers — half the monthly average from December through January.

The government will report on April job growth Friday. Economists expect employers added 163,000 last month, according to a survey by FactSet. The unemployment rate is expected to stay unchanged at 8.2 percent.

Rising labor costs can signal inflation pressures. But economists have not expressed worries about the recent higher trend for unit labor costs. With so many people out of work and looking for jobs, there is little chance that wage pressures will get out of hand, they note.

That return to more normal hiring patterns is good for the economy because it reduces unemployment and provides consumers with more spending power. Consumer spending accounts for 70 percent of economic growth.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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