First-Quarter Productivity Declines

U.S. workers’ productivity declined at a 0.5% annual rate in the first quarter, the Labor Department said Thursday.

The decline followed a 1.2% increase in the fourth quarter. For all of 2011, productivity rose at a 0.4% annual rate.

Productivity is a measure of how much an employee produces for every hour of work.

Economists had forecast a 0.6% decline for the first quarter, Bloomberg reported. Expenses per worker rose at a 2% rate, less than estimated.

When worker efficiency improves at a slower pace and labor becomes more expensive, companies may raise prices in order to guard their profits, contributing to more rapid inflation.