Productivity Rises Sharply, Compensation Rises

Nonfarm productivity rose at a very strong 3.4 percent annual rate in the first quarter (revised from an initial 3.6 percent), reflecting strength and efficiency in output which rose at a 3.9 percent pace against only a 0.5 percent rise in hours worked. Compensation also rose, at a 1.8 percent rate but still modest relative to output which pulled down unit labor costs by a steep 1.6 percent. This report has been very favorable over the last year, helping to ease what had been persistent concern over the slow pace of productivity improvement.