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

University of Michigan Wins Solar Car Race

Squad guided its student-designed solar-powered vehicle to fifth consecutive time victory in eight-day bi-annual American Solar Challenge More

Nigerian Islamic School Tries to Combat Boko Haram

Kaduna school headmaster teaches his students that what militants are doing is are doing is 'a total misunderstanding of the Islamic religion' More

University Trains Students to Advocate for Deaf People Worldwide

Program prepares graduates to advocate internationally for access to education, jobs for people with disabilities More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.