Productivity Increases in First Quarter

Washington, DC, May 7, 2009--Productivity rose in the first quarter as U.S. firms cut their workforce, outpacing the drop in output, the Labor Department reported Thursday.

Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% -- the largest drop in hours since 1975.

Unit labor costs rose 3.3%, and real hourly compensation gained 6.6%.
Productivity gains are the key to higher living standards, higher wages, increased profits and low inflation.

Economists had expected no change in productivity, and a 3% gain in unit labor costs.

Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.

Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%.

High productivity growth means the economy can grow rapidly without inflation, raising living standards and theoretically allowing workers to get big raises without hurting the boss's profits.