U.S. productivity rose faster than expected in the first three months of the year, though the gains were more modest than in previous quarters as the recovery continued to take hold.

Separately, the number of U.S. workers filing new claims for jobless benefits fell a third consecutive time last week in a sign that the labor market is slowly healing.

Nonfarm business labor productivity rose by a seasonally-adjusted annual rate of 3.6% in the first quarter, after expanding at a downwardly revised 6.3% pace in the fourth quarter of last year, the Labor Department said Thursday. Fourth-quarter productivity was previously estimated to have increased 6.9%.

Economists in a Dow Jones Newswires survey had expected a 2.6% rise in productivity in the January-to-March period.

Unit labor costs — a key gauge of inflationary pressures — decreased at a 1.6% annual rate last quarter, versus expectations for a 0.7% decline. Fourth-quarter unit labor costs were revised to a 5.6% decline from the previous estimate of a 5.9% drop.

The lack of wage pressures indicates the Federal Reserve should be in no hurry to start raising interest rates from unprecedented lows around zero.

Productivity, which is defined as output per hour worked, usually picks up sharply at the end of recessions and then eases off as businesses start hiring and increasing work hours to meet demand. The ongoing decline in unit labor costs shows that productivity continues to outstrip compensation.

Hourly compensation in the nonfarm business sector increased 1.9% last quarter. Real compensation, adjusted for inflation, rose 0.4%.

Nonfarm business output rose 4.4% during the first quarter, at an annual rate, following a 7.0% gain the previous quarter. Hours worked rose 0.8%, the biggest increase since the second quarter of 2007, after climbing 0.7% in the fourth quarter.

Productivity in the manufacturing sector rose 2.5% last quarter. Manufacturing output increased 7.5%. Hours worked in the manufacturing sector posted their biggest jump since the second quarter of 1996, gaining 4.9%.

Jobless Claims Fall a Bit
The Labor Department said in its weekly report Thursday that initial claims for jobless benefits declined by 7,000 to 444,000 in the week ended May 1. Economists surveyed by Dow Jones Newswires had predicted initial claims would fall by 8,000.

The previous week’s level was revised slightly upward to 451,000 from 448,000.

The Labor Department’s report on Thursday showed that the four-week moving average, which aims to smooth volatility in the data to help paint a better picture of the underlying trend, fell for the week ended May 1. The Labor Department said the four-week moving average went down by 4,750 to 458,500 from the previous week’s revised average of 463,250.

Total claims lasting more than one week, meanwhile, also fell.

Claims have resumed their downward trend in recent weeks after they unexpectedly surged in early April. Labor Department economists said the increases were caused by holiday and seasonal factors and not from a jump in layoffs.

This latest decline comes just one day after a report by payroll giant Automatic Data Processing Inc. (ADP) found that private sector jobs grew by 32,000 in April while layoff announcements fell to a nearly four-year low.

The report by ADP only includes private payrolls, but on Friday the Labor Department is due to release its monthly jobs report for April, which will also includes government hiring. Economists are predicting that nonfarm payrolls will rise by 180,000. But in a sign that workers are still having trouble securing work, experts also expect the unemployment rate to remain at a high 9.7%.

In the Labor Department’s Thursday report, the number of continuing claims–those drawn by workers for more than one week in the week ended April 24–fell by 59,000 to 4,594,000 from the preceding week’s revised level of 4,653,000.

The unemployment rate for workers with unemployment insurance for the week ended April 24 was 3.6%, unchanged from the prior week’s unrevised rate.

The largest decreases in claims for the week ended April 24 were reported by Florida and North Carolina. Florida reported fewer layoffs in the construction, trade, service and manufacturing sectors. North Carolina, meanwhile, had fewer layoffs in the industrial machinery, computer equipment, fabricated metals, electrical equipment, electronic equipment, leather, leather goods and finance industries. Other states with decreases included New York, Wisconsin and Georgia. The largest increases in claims occurred in California due to layoffs in the service industry.

A Labor Department economist said Thursday’s report for the most part was “uneventful,” although he did note that numbers for Tennessee were estimated after flooding at the state office prevented them from reporting claims data.

By TOM BARKLEY

Tags: business, Dow Jones Industrial, economic, economic recovery, economy, Federal Reserve, interest rates, unemployment, unemployment rate, us economy, us manufactured, us workers, USA

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