Economy

Macro Matters

May 5, 2022
4:33 PM EDT
Last Updated 7 days ago

U.S. weekly jobless claims rise; productivity plunges at fastest pace in 74 years

By Lucia Mutikani

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Rising labor costs were reinforced by a third report from the Labor Department showing worker productivity plummeting at its sharpest pace in more than 74 years in the first quarter, suggesting that the Fed cannot, for now, rely on workers being more productive to rein in inflation.

Nonfarm productivity, which measures hourly output per worker, plunged at a 7.5% annualized rate last quarter, the deepest slide since the third quarter of 1947. That followed a 6.3% growth pace in the fourth quarter.

But last quarter's plunge likely exaggerates the pace of decline in productivity, which was flagged in last week's first-quarter gross domestic product report. The economy contracted at a 1.4% rate in the January-March period.

Productivity fell at only a 0.6% pace from a year ago. It has been volatile since the start of the COVID-19 pandemic more than two years ago. Hours worked increased at a 5.5% rate in the first quarter. Unit labor costs - the price of labor per single unit of output - shot up at an 11.6% rate. That followed a 1.0% growth pace in the October-December quarter. Unit labor costs increased at a 7.2% rate from a year ago.

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