US productivity beats expectations

US businesses cut back on worker hours during the first three months of this year as the economy slowed, driving up productivity…

US businesses cut back on worker hours during the first three months of this year as the economy slowed, driving up productivity to a higher-than-expected 2.2 per cent annual pace, a government report today showed.

Economists polled by Reuters were expecting nonfarm worker productivity, or hourly output per worker, to increase at a 1.5 per cent annualized rate.

The Labor Department said worker hours fell at a 1.8 per cent rate during the quarter, making it the biggest decline since the start of 2003.

Unit labor costs, a gauge of inflation and profit pressures under close scrutiny by the Federal Reserve, rose at a 2.2 per cent annual pace, slower than the 2.5 per cent increases analysts were expecting.

Compensation per hour rose at a 4.4 per cent annual rate, but adjusted for inflation, it rose a scant 0.1 per cent.