The Labor Department revealed on Thursday that labor productivity in the U.S. in Q1 2024 underperformed against predictions. Rather than the expected leap, productivity saw only a marginal 0.3% increase, following a noteworthy 3.5% boost in Q4 2023.
Professional economic forecasters had predicted a 0.8% growth, contrasting with the previous quarter’s 3.2% surge. Despite a solid 1.3% rise in output, this was largely counterbalanced by a 1.0% hike in working hours, only contributing to a minor ascension in labor productivity, or output per hour.
Simultaneously, the first quarter witnessed a sharp 4.7% increase in unit labor costs after the previous quarter recorded no change. Contrarily, expert economists had anticipated labor costs ballooning by just 3.2% rather than the nominal 0.4% of the quarter prior.
Nationwide Financial Markets Economist, Oren Klachkin, argued that the underwhelming productivity growth of the last quarter did little to counteract rising wage costs. According to Klachkin, the substantial rise in unit labor costs is more evidence of ongoing inflation pressures.
In Q1, hourly compensation also saw a significant surge of 5.0%, following a 3.5% increase in Q4. When accounting for changes in consumer prices, real hourly compensation rose by 1.1% in this quarter, somewhat more than the 0.8% increase of the previous quarter.
