News / Economy

Cold Weather Sinks US Productivity but Trend Steady

Reuters
U.S. non-farm productivity fell at its fastest pace in a year in the first quarter as harsh winter weather restrained output, leading to a jump in labor-related production costs.

The drop in productivity, which mirrored a sharp decline in economic growth, is temporary and Federal Reserve officials are likely to shrug off the spike in labor costs, analysts said.

"Weather impacts are temporary, and as such, we should see productivity growth rebound substantially in the second quarter as economic growth strengthens," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Productivity declined at a 1.7 percent annual rate, the biggest drop since the first quarter of 2013, the Labor Department said on Wednesday.

Productivity, which measures hourly output per worker, advanced at a 2.3 percent pace in the fourth quarter and economists had expected it to fall at a rate of only 1.0 percent in the first three months of the year.

An unusually cold and snowy winter in large areas of the United States slammed output, which rose at a feeble 0.3 percent rate, braking sharply from the fourth-quarter's brisk 3.8 percent pace.

The decline in productivity was in tandem with an abrupt slowdown in economic growth in the first quarter.

Gross domestic product expanded at a 0.1 percent annual rate, the government said in its advance estimate last week, a slowdown from the fourth quarter's 2.6 percent rate.

However, subsequent data on March trade, factory orders and construction spending suggest the economy actually contracted in the first three months of the year.

Productivity Trend Steady

The trend in productivity, however, remains modestly up. Compared to the first quarter of 2013, productivity increased 1.4 percent. Workers put in more hours in the first quarter but with output falling that raised labor costs.

Unit labor costs, the price of labor per single unit of output, surged at a 4.2 percent rate after falling at a 0.4 percent rate in the fourth quarter. It was the biggest rise in unit labor costs since the fourth quarter of 2012.

Economists had expected unit labor costs to increase at a 2.6 percent rate. Despite the rise last quarter, there was little sign that wage inflation was igniting.

Unit labor costs rose only 0.9 percent compared to the first quarter of 2013.

"I am not seeing any firming trend in wages at this point," said Alan MacEachin, an economist at Navy Federal Credit Union in Vienna, Virginia. "I don't think we are going to see a firming in wages at least for a year. The market thinks the Fed will start to tighten [policy] mid to late 2015."

A government report last week showed labor costs increased at their slowest pace in more than two years in the first quarter. In addition, the closely watched employment report released last week showed wage growth was stagnant in March.

Slack in the jobs market is suppressing wage inflation, keeping overall price pressures in the economy benign.

Though temporary, the drop in productivity and weak economic growth bode ill for hiring. Employers added 569,000 jobs in the first quarter.

Daniel Silver, an economist at JPMorgan in New York, said the combination of solid labor demand and weak GDP growth in first quarter probably will not be sustained.

You May Like

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.