US worker productivity dropped 3.1 percent in the first quarter

US worker productivity dropped sharply in the first quarter of 2015. Productivity refers to the rate of production of a unit of input, including workers and capital equipment. In a shirt factory, productivity might be looking at how many shirts each worker produces per hour or per day.

According to the Labor Department, worker productivity declined 3.1 percent in Q1 – higher than the 1.9 percent drop estimated last month – while labor costs rose at a 6.7 percent rate.

The US economy was hit by extreme weather conditions in the first quarter of the year, causing the economy to contract in the January-March quarter.

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According to the WSJ, Patrick Newport, U.S. economist at IHS Global Insight, said:

“Should we be worried about productivity? Yes. Not because it plunged in the first quarter, but because its growth since the end of the recession has been so anemic.”

Economists are optimistic about the future of the US economy, with many saying that growth and productivity is rebounding, but there is little consensus about why output per hour of work has been weaker in recent years.

“The most important factor determining living standards is productivity growth, defined as increases in how much can be produced in an hour of work,” Federal Reserve Chairwoman Janet Yellen said in a speech last month.

She added:

“Over time, sustained increases in productivity are necessary to support rising incomes.”

For fiscal 2014 productivity only increased 0.7 percent, after a 0.9 percent gain in 2013.

Productivity in the US increased at average annual rates of 2.8 percent from 1995 to 2000. In comparison, since 2000 productivity has slowed to annual rates of 2.1 percent.