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 Claims to Show Shia Forces in Iraq Executing Sunni Boy

While not yet independently confirmed, brutal killing already has gotten attention of Islamic State followers on social media More

After Six Years, Little Change for Niger Delta's Former Militants

Nigerians who laid down arms in exchange for government amnesty subsidies fear program may end with upcoming presidential elections More

Vietnam Pushes for More Educated Drivers to Curb Road Deaths

Transportation officials hope that making a greater effort to get drivers to learn the rules of the road will reduce fatal crashes More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA Spacecraft Approaches a Dwarf Planeti
X
George Putic
March 04, 2015 8:51 PM
NASA’s Dawn spacecraft will make history on Friday, March 6, when it becomes the first man-made object to orbit a dwarf planet named Ceres. It is located in the asteroid belt between Mars and Jupiter, almost 500 million kilometers from Earth. Among other objectives, Dawn will try to examine two mysterious bright white spots detected on the planet’s surface. VOA’s George Putic has more.
Video

Video NASA Spacecraft Approaches a Dwarf Planet

NASA’s Dawn spacecraft will make history on Friday, March 6, when it becomes the first man-made object to orbit a dwarf planet named Ceres. It is located in the asteroid belt between Mars and Jupiter, almost 500 million kilometers from Earth. Among other objectives, Dawn will try to examine two mysterious bright white spots detected on the planet’s surface. VOA’s George Putic has more.
Video

Video Young Muslims Radicalized Online

Young Muslims are being radicalized ‘in their bedrooms’ through direct contact with Islamic State or ISIL fighters via the Internet, according to terror experts. There are growing concerns that authorities and Internet providers are not doing enough to counter online extremism - which analysts say is spread by a prolific network of online supporters around the world. Henry Ridgwell reports from London.
Video

Video African Americans Recall 1960's Fight For Voting Rights

U.S. President Barack Obama and thousands of people will gather in the small southern U.S. city of Selma, Alabama, Saturday, March 7th to commemorate the 50th anniversary of a historic voting rights march that became known as “Bloody Sunday." VOA’s Chris Simkins traveled to Alabama and introduces us to some of the foot soldiers of the voting rights struggles of the 1960’s.
Video

Video Positive Messaging Transforms Ethiopia's Image

Ethiopia was once known for famine and droughts. Now, headlines more often point to its fast-growing economy and its emergence as a regional peacemaker. How has Addis Ababa changed the narrative? VOA's Marthe van der Wolf reports.
Video

Video Cyber War Rages Between Iran, US

A newly published report indicates Iran and the United States have increased their cyber attacks on each other, even as their top diplomats are working toward an agreement to guarantee Iran does not develop a nuclear weapon and to free Iran from international sanctions. The development is part of a growing global trend. VOA’s Al Pessin reports from London.
Video

Video Answers Elude Families of MH370 Passengers

For the families on board Malaysia Airlines flight MH370, an airline official’s statement nearly one year ago that the plane had lost contact with air traffic control at 2:40 AM is the only thing that remains confirmed. William Ide reports.
Video

Video Land Disputes Arise Amid Uganda Oil Boom

Ugandan police say there has been a sharp increase in land disputes, with 10 new cases being reported each day. The claims come amid an oil boom as investors appear to be cashing in by selling parcels of land to multiple buyers. Meanwhile, the people who have been living on the land for decades are chased away, sometimes with a heavy hand. VOA's Serginho Roosblad reports.
Video

Video In Russia, Many Doubt Opposition Leader's Killer Will Be Found

The funeral has been held in Moscow for Boris Nemtsov, the opposition leader who was assassinated late Friday just meters from the Kremlin. Nemtsov joins a growing list of outspoken critics of Russia under the leadership of President Vladimir Putin who are believed to have been murdered for their work. VOA’s Daniel Schearf reports from Moscow.
Video

Video Simulated Astronauts Get Taste of Mars, in Hawaii

For generations, people have dreamed of traveling to Mars to explore Earth's closest planetary neighbor. VOA's Mike O'Sullivan reports that while space agencies like NASA are planning manned missions to the planet, some volunteers in Hawaii are learning how humans will cope with months in isolation on a Mars base.
Video

Video Destruction of Iraq Artifacts Shocks Archaeologists

The city of Mosul was once one of the most culturally rich and religiously diverse cities in Iraq. That tradition is under attack by members of the Islamic State who have made Mosul their capital city. The Mosul Museum is the latest target of the group’s campaign of terror and destruction, and is of grave concern to archaeologists around the world. VOA’s Kane Farabaugh reports.
Video

Video Smartphones May Help in Diagnosing HIV

Diagnosing infections such as HIV requires expensive clinical tests, making the procedure too costly for many poor patients or those living in remote areas. But a new technology called lab-on-a-chip may make the tests more accessible to many. VOA’s George Putic reports.
Video

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials have expressed concern over reports of a crackdown on Afghan refugees in Pakistan following the Peshawar school attack in December. Reports of mass arrests and police harassment coupled with fear of an uncertain future are making life difficult for a population that fled its homeland to escape war. VOA’s Ayesha Tanzeem reports from Islamabad.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.8954
JPY
USD
119.75
GBP
USD
0.6515
CAD
USD
1.2518
INR
USD
61.921

Rates may not be current.