Labor Costs Jumps 11.6 % As Productivity Falls 7.5%, Biggest Decline Since 1947

US President Joe Biden speaks to members of the media prior to boarding Air Force One at Des Moines International Airport in Des Moines, Iowa, on April 12, 2022. (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)
MANDEL NGAN/AFP via Getty Images

Worker productivity fell 7.5 percent in the first three months of the year, the sharpest decline since 1947, the Bureau of Labor Statistics said Thursday.

Economists had expected this measure of nonfarm productivity to fall a milder 2.5 percent after a 6.3 percent rise in the fourth quarter of 2021. Nonfarm productivity is measured by comparing the total number of hours worked to the economy’s total output.

Unit labor costs, a measure of what businesses pay to produce a unit of output, jumped 11.6 percent. Over the last four quarters, unit labor costs are up 7.2 percent. That’s the largest year-over-year gain since 1982.

This barometer was also worse than expected. Economists had forecast a 6.8 percent rise in unit labor costs. The higher than expected figure shows that inflation was even stronger than thought as the year took off.

The economy contracted 1.4 percent in the first quarter even as businesses went on a hiring spree. Unemployment dropped to 3.6 percent in the quarter and job openings rose to a record high 11.5 percent.

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