U.S. Worker Productivity Plunges at Fastest Pace Since 1947

U.S. labor productivity tumbled by 7.5% in the first quarter, according to Labor Department data.

Unit labor costs, or how much workers are paid per unit of output, surged by 11.6% on the first months of the year, the biggest gain since the third quarter of 1982.

The data reflects a 3.2% increase in hourly compensation and a 7.5% decrease in productivity, a figure that represents the biggest fall since the third quarter of 1947.

Wall Street analysts already estimated a 5.2% decline in productivity and an increase of 10.5% in unit labor costs.

Data announced by the Labor Department underscores the strong labor market, where companies are trying to attract and retain talent pushing up wages. In March, job openings and quits set all-time highs at 11.5 million and 4.5 million, respectively.

The number of people receiving benefits after one week of aid dropped 19,000 to 1.384 million during the week ending April 23, recording its lowest level since January 1970.

Ongoing supply chain disruptions caused by the pandemic and Russia’s invasion of Ukraine is fueling inflation. High wages are also adding further disruption on hiking prices.

To control the worst inflation in 40 years the Federal Reserve raised its benchmark rate by half a percentage point, the biggest jump since 2000.