Productivity gains in the US accelerated by more than expected last quarter to the fastest pace since 2014, adding fuel to the Trump administration’s argument that its tax cuts are boosting the economy without stoking inflation.
Non-farm business employee output per hour increased at 3.6 percent annualised rate in the January-March period, according to Labor Department figures. That topped all forecasts in Bloomberg’s survey of economists and followed a downwardly revised 1.3 percent gain in the fourth quarter. Unit labor costs fell at a 0.9 percent rate following a 2.5 percent increase.
The pickup partly reflects faster economic growth, which hit an unexpectedly high 3.2 percent in the first quarter. Inflation also cooled during
the period. President Donald Trump has said muted price gains call for the Federal Reserve to inject monetary stimulus so the economy can take off like a “rocket.”
It will still probably take more time to determine whether productivity is enjoying persistent increases after relatively slow gains throughout the current expansion, with an average of 1.3 percent from 2007 to 2018.
Fed Chairman Jerome Powell brushed aside pressure for an interest-rate cut and said productivity is partly driven by technology developments and very hard to predict.
The report showed output rose at a 4.1 percent pace, while hours worked increased 0.5 percent; that gain was last slower in 2015. The US jobs report is forecast to show wages churned higher in April.