Washington, DC, May 1--U.S. productivity improved in the first quarter, increasing at an annual rate of 1.6% as companies produced more while they kept work forces lean.
The gain in productivity, the amount of output per hour of work, posted in the quarter was more than twice the size of the 0.7% growth rate registered in the previous quarter, according to the Labor Department.
However, productivity in the first quarter wasn't as strong as the 2% growth rate economists were forecasting.
Separately, new claims for unemployment benefits dropped last week by a seasonally adjusted 13,000 to 448,000, the department said. However, even with the decline, claims clocked in at their second highest level of this year.
For 11 straight weeks, claims have been above the 400,000 mark, a level associated with a weak labor climate. The level of claims last week were higher than economists were expecting.
The more stable four week moving average of jobless claims went up last week by 1,250 to 442,000. That marked the highest level in just over a year.
“The persistent high level of new claims for unemployment insurance suggests that firms may still be finding it possible to meet their customers' tepid increases in demand with a leaner work force,” Federal Reserve chairman Alan Greenspan said when he provided House lawmakers with an updated picture on the economic recovery.
Greenspan said the economy gradually should grow stronger with the end of the Iraq war. Many private economists are hopeful a material rebound in economic activity will develop in the second half of this year.
Even if that happens, the nation's unemployment rate probably will creep up because job growth won't be strong enough to accommodate the expectation that an improved climate will attract a lot more job seekers.
Economists are predicting the jobless rate will nudge up to 5.9% or 6% in April, from March's rate of 5.8%. They also are expecting the economy to lose around 58,000 jobs in April. While job loss isn't something economists want to see, that would be an improvement over the 108,000 jobs cut in March.
The number of workers continuing to draw jobless benefits soared by 110,000 to 3.68 million for the work week ending April 19, the most recent period for which the information is available. That marked the highest level in nearly a year and suggested that not much hiring is taking place.
The productivity report showed that companies kept up production in the first quarter, while keeping a lean work force. Output rose at a rate of 1.4% during the period, while workers' hours dipped at a rate of 0.1%.
Greenspan said one reason the job market is so sluggish is because with solid productivity gains, companies can maintain production with existing workers or fewer workers.
Workers lost ground in wages in the first quarter. Hourly compensation adjusted for inflation fell 0.3%, compared with a 1.9% increase in the fourth quarter of last year.
Companies also felt pinched. Unit labor costs went up 1.3% in the first quarter, compared with a 1.4% decline in the fourth quarter.
