US productivity growth slowed in early 2024

(Reuters) - U.S. worker productivity grew slightly less than previously estimated in the first quarter but exceeded market expectations, and unit labor costs rose by less than first thought, data from the Labor Department showed on Thursday, although the revision seems unlikely to allay Federal Reserve officials' hesitance to turn to rate cuts in the near term.

Nonfarm productivity, which measures hourly output per worker, increased at a 0.2% annualized rate in the first quarter, revised down from an initial estimate of 0.3% one month ago. Economists polled by Reuters had estimated a revision down to 0.1%.

Unit labor costs, meanwhile, rose at a 4.0% annualized rate, down from the Bureau of Labor Statistics' first estimate of 4.7%. Economists had projected labor costs to be revised up to 4.9%.

Productivity had accelerated and labor costs were subdued through much of 2023, finishing the year at 3.5% and unchanged, respectively, in the fourth quarter. At the time, that had been seen as one of the arguments favoring rate cuts from the Fed this year as improved worker efficiency was hoped to further dampen inflation.

The near stalling of productivity in the first quarter did not further that cause, though some economists had cautioned after the initial BLS estimate was published last month that the data had been influenced by a seasonal quirk and that the trend of improving productivity may still hold up.

(Reporting By Dan Burns; Editing by Chizu Nomiyama)

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