Updated July 31 at 9:31am

Productivity of U.S. workers decreased in the first quarter

American workers were less productive in the first quarter as harsh winter weather prevented some from getting to their jobs, causing the economy to stall.

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Productivity of U.S. workers decreased in the first quarter

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WASHINGTON – American workers were less productive in the first quarter as harsh winter weather prevented some from getting to their jobs, causing the economy to stall.

The measure of employee output per hour dropped at a 1.7 percent annualized rate, the weakest reading in a year, after rising at a 2.3 percent pace in the last three months of 2013, a Labor Department report showed today in Washington. The median forecast in a Bloomberg survey of 59 economists called for a 1.2 percent drop. Unit labor costs climbed at a 4.2 percent rate, more than estimated.

The pullback in productivity came as snow and unusually cold weather covered much of the U.S., depressing economic activity as consumers stayed indoors and companies put off investment plans. As growth recovers in the months ahead, some companies may be induced to either take on more workers or invest in equipment to keep up with demand.

“All the things that held down GDP, including weather and slower foreign demand,” also hurt productivity, said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala., who correctly forecast the decline in output per hour. “You can get quarterly swings like this, but what’s more important is the underlying trend, and productivity growth has been slowing for a while.”

Growth potential

Productivity is important because it helps determine the pace at which an economy can grow without stoking inflation, which economists term its speed limit. That reflects the rate of growth of the labor force plus how much each worker can produce. Smaller gains in productivity therefore mean advances in gross domestic product will also be restrained.

Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.2 percent to 1,868.1 at 8:49 a.m. in New York as investors weighed corporate earnings before Federal Reserve Chair Janet Yellen addresses Congress.

Labor Department, worker productivity, winter weather, Janet Yellen, manufacturing, GDP,
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