WASHINGTON - US businesses boosted productivity at a 2.6 percent annualized pace in the first quarter, the Labor Department said Thursday.
The increase was an improvement over the 2.1 percent pace in the fourth quarter of 2004 and better than the 1.8 percent expected by private economists.
Unit labor costs -- a key measure of inflationary pressures from compensation -- increased 2.2 percent at an annualized rate.
Real hourly compensation (adjusted for inflation) increased at a 2.4 percent annual rate in the first quarter.
Productivity is measured by unit of output per hour worked. It is an essential factor in long-term economic health, but is extremely difficult to measure in the short-run, especially in services industries. It can allow companies to reap higher profits while giving workers higher pay without raising prices.
In the manufacturing sector, productivity increased 3.9 percent while unit labor costs increased 0.9 percent. The figures show employers were squeezing more output from their workforce in the first quarter, but were also paying them more.
In the past three years, productivity boomed and profits soared, while unit labor costs and compensation were stagnant.
In all of 2004, productivity increased 4.1 percent, while unit labor costs increased 0.4 percent.
Productivity has increased 2.5 percent in the past four quarters, the smallest year-over-year gain in nearly four years. Unit labor costs have risen 2.5 percent in the past year, the fastest gain in nearly four years.
It now takes just 82 workers to produce what 100 workers could produce in 2000.
05/05/2005 14:35 GMT