Employee productivity took its biggest slide in a year, not because workers are slacking off but because businesses are boosting their head counts to keep up with demand.
That’s a good sign for the job market. It shows that bosses, who whittled their ranks during the lean years, are no longer able to squeeze as much output as they once were from their skimpy workforce.
Despite frail GDP growth last quarter, demand for goods and services was strong (though it may be starting to slacken, depending on whom you ask). To maintain momentum, companies had to increase hiring.
As a result, non-farm productivity slid at a 0.5% annual rate in the first quarter after gaining 1.2% in the fourth quarter and 8.3% at its peak during the recession, according to the Labor Department. That’s the largest quarter-over-quarter drop in a year.
That’s even though the hours that employees worked increased 3.2%. Productivity is measured as the amount of output produced (up 2.7%) for each hour of work.