U.S. worker productivity fell in the first quarter by the most in a year, as companies hired more workers to maintain output, and a moderate rise in wages suggested little pressure on company profits and inflation, the government reported Thursday. The Labor Department said productivity -the amount of hourly output per worker- fell at a 0.5 percent annual rate in the January-March quarter after rising at a 1.2 percent rate in the final three months of 2011. The decline in productivity was in line with economist expectations. The drop in productivity was the first since the second quarter of 2011 and the biggest decline since the first quarter of that year. Productivity grew rapidly as the economy emerged from the 2007-2009 recession, peaking at an 8.3 percent growth rate in the second quarter of 2009. The gains were driven by companies cutting costs, particularly for labor. But businesses now are finding it difficult to get more output from the existing pool of labor. In the first quarter, employers added about 635,000 new jobs to their payrolls, even though the economy grew at a modest 2.2 percent annual rate. Falling productivity amid modest growth is a good sign for jobseekers, signaling that companies must hire to meet rising demand. The productivity report showed unit labor costs grew at a 2.0 percent annual rate in the first quarter after increasing at a 2.7 percent rate in the fourth quarter. However, the drop in productivity and the rise in labor costs are unlikely to pressure corporate profits because businesses have strong balance sheets. U.S. companies are holding an estimated $2 trillion in cash. Wage inflation remains subdued, largely because the unemployment rate is 8.2 percent. In the first quarter, total hours worked increased at a 3.2 percent annual rate after rising at a 2.4 percent rate in the fourth quarter of 2011.
