–Despite 1Q Decline, Productivity Up 0.5% Y/Y Vs +0.4% In 4Q
–Unit Labor Cost Y/Y Growth Slows To 2.1% Vs 3.1% In 4Q

By Kevin Kastner and Ian McKendry

WASHINGTON (MNI) – U.S. nonfarm productivity fell at a 0.5% annual
rate in the first quarter of 2012 following an upward revised 1.2% rise
in the fourth quarter, as first quarter output growth slowed from the
previous quarter and hours worked growth accelerated, data released by
the Bureau of Labor Statistics Thursday showed.

The decline in productivity was offset by a slowdown in the rate of
compensation growth, so unit labor cost growth slowed to 2.0% in the
first quarter from a downward revised 2.7% rise in the previous quarter.

Output rose 2.7% in the first quarter, a slowdown from the 3.7%
fourth quarter rise. At the same time, the growth in hours worked was
3.2% in the first quarter, up from 2.4% in the fourth quarter.

Hourly compensation posted a 1.5% first quarter rise, much slower
than a revised 3.9% rise in the fourth quarter.

The implicit price deflator posted a 1.3% increase in the first
quarter after a 0.8% rise in the fourth quarter. As a result of the
slowdown in compensation growth and an acceleration in price inflation,
real compensation fell 0.9% in the first quarter following a 2.6% fourth
quarter rise.

On a year-over-year basis, first quarter productivity growth
accelerated modestly from the previous quarter despite the first quarter
decline. The year-over-year growth rate for the first quarter now stands
at 0.5% after 0.4% in the fourth quarter.

First quarter unit labor costs were up 2.1% from a year earlier,
compared with the 3.1% year-over-year rise in the fourth quarter.

For the manufacturing sector, productivity rose at a 5.9% annual
rate in the first quarter, up sharply from 0.6% in the previous quarter
and the strongest pace since the second quarter of 2010. Output growth
accelerated to 10.8% in the first quarter, double the 5.4% rate in the
previous quarter, while hours work growth slowed to 4.6% from 4.8% in
the fourth quarter.

As a result, manufacturing unit labor costs plunged 4.2% in the
first quarter, the largest drop since the first quarter of 2010 and
following a 1.3% rise in the fourth quarter.

** MNI Washington Bureau: 202-371-2121 **