U.S. nonfarm productivity fell less sharply than previously thought in the first quarter, but labor-related costs still surged as companies employed more workers to boost output.
The Labor Department said on Tuesday productivity, which measures hourly output per worker, contracted at an annualized rate of 0.6 percent, instead of the 1.0 percent pace reported last month. The revision, which reflected modestly higher output than previously estimated, was in line with economists' expectations.
Productivity fell at a 1.7 percent rate in the fourth quarter. The government last month raised its first-quarter economic growth estimate to a 0.8 percent rate from the 0.5 percent pace reported in April.
Productivity, which has only increased in two of the last six quarters, rose at a 0.7 percent rate compared to the first quarter of 2015.
The weakness in productivity partially explains the divergence between the economy's anemic performance at the start of the year and a fairly strong labor market, marked by average monthly job gains of 196,000 in the first quarter.