WASHINGTON (Reuters) -U.S. worker productivity dropped at a faster pace than initially thought in the first quarter, driving labor costs sharply higher at a time when businesses are already facing rising costs from tariffs on imported goods.
Nonfarm productivity, which measures hourly output per worker, decreased at a 1.5% annualized rate last quarter, the Labor Department’s Bureau of Labor Statistics said on Thursday.
That was revised down from the previously reported 0.8% pace of decline and marked the first drop since the second quarter of 2022. Economists polled by Reuters had forecast the decline in productivity would be unrevised at a 0.8% rate.
Productivity increased at an unrevised 1.7% rate in the October-December quarter. It grew at a 1.3% rate from a year ago, revised down from the 1.4% pace estimated last month.
Corporate profits dropped in the first quarter and could come under pressure as President Donald Trump’s tariffs produce economic uncertainty that economists have warned would hamper consumer and business spending.
Airlines, retailers and motor vehicle manufacturers are among the companies to have either withdrawn or refrained from giving financial guidance for 2025, citing the uncertainty caused by the on-again, off-again nature of some of the duties.
Unit labor costs – the price of labor per single unit of output – shot up at a 6.6% rate in the first quarter. They were revised up from the previously reported 5.7% growth pace.
Labor costs increased at a 1.9% rate from a year ago, upgraded from the previously reported 1.3% pace.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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