The productivity of American workers fell at a sharp 0.9 percent annual rate from January through March as the deepening recession forced cutbacks in production and the biggest decline in the number of hours worked in 11 years, the government reports.
The Labor Department said that during the first quarter, the nation's businesses cut working hours of their employees at a 4.9 percent annual rate while output fell by an even faster 5.8 percent.The 0.9 percent drop in productivity - defined as output per hours worked - followed a revised 0.7 percent decrease in the fourth quarter, which originally had been reported to have been a 0.3 percent gain.
The cut in hours worked was the largest since hours dropped 7.8 percent during the second quarter of 1980 at the end of a previous economic downturn. The drop in output was the sharpest since it fell 7.5 percent in the fourth quarter of 1981 during the last recession.
The Labor Department said it was the second straight decline in non-farm productivity. The fourth-quarter drop was the first since a steep 1.3 percent decrease in the first quarter of 1990.
Non-farm productivity is defined as output per hour of work. Increased productivity, or getting each worker to produce more during each hour of work, is considered vital to increasing the nation's standard of living without boosting inflation. It also can increase the competitiveness of U.S. goods overseas.
Productivity declined a revised 0.9 percent in 1990, the steepest since a 0.9 percent drop in 1982, the final year of the last recession. The drop originally was reported to have been 0.8 percent. Combined with a 0.7 percent decline in 1989, it was the first back-to-back retreat since 1979-80.
The department said the number of hours worked fell 2.8 percent in the fourth quarter and 0.2 percent in the third. The 2.8 percent drop had been the largest since the 1981-82 recession.
Hourly labor costs, a major measure of inflation for non-farm businesses, rose at a 4.0 percent rate in the first quarter. For workers, that translated into a 2.5 percent increase in compensation once consumer inflation was factored. Hourly costs fell 1.8 percent in the final period of 1990.
Unit labor costs, a key gauge of future price inflation, rose 5.0 percent, up from a 4.7 percent increase from October through December.