U.S. Productivity Slumps 1.9% In First Quarter

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U.S. productivity in the first quarter fell by a 1.9% annual pace, resulting in the first back-to-back drop since 2006. The decline in productivity stemmed from companies hiring more workers and employees worker longer hours even as production of goods and services declined. Hours worked rose 1.7% in the first quarter while output of goods and services fell 0.2%, the Labor Department said Wednesday. Lower output may have been partly the result of an unusually harsh winter disrupting production and a surging dollar that curtailed U.S. exports. Unit-labor costs, meanwhile, jumped by a 5% annual rate to mark the biggest gain in a year, though they are only up 1.1% compared to a year earlier. Hourly compensation for all workers rose 3.1% in the first quarter, and it rose a strong 6.2% adjusted for inflation. Yet real compensation is up just 1.8% from a year earlier. The decline in productivity in the 2014 fourth quarter was revised slightly to 2.1%.

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