Labor Productivity Plummeted as COVID-19 Crisis Hit

Labor productivity decreased 2.5 percent in the first quarter of 2020, the U.S. Bureau of Labor Statistics reports, as output decreased 6.2 percent and hours worked decreased 3.8 percent.

Unit labor costs in the nonfarm business sector increased 4.8 percent in the first quarter of 2020, as hourly compensation increased 2.2 percent and productivity decreased 2.5 percent. Unit labor costs increased 1.5 percent over the last four quarters.

The reference period for this data largely predated many of the COVID-19-related job losses that occurred in the latter part of March.

To capture these job losses, adjustments were made to March employment, based on the Department of Labor’s Employment and Training Administration weekly reports of the number of initial claims for unemployment insurance benefits.

Hours and related measures–including labor productivity–for the first quarter of 2020 reflect these adjustments.

The 2.5-percent decline in nonfarm business sector labor productivity in the first quarter of 2020 was the largest quarterly decline since the fourth quarter of 2015, when output per hour decreased 2.9 percent.

It reflects the largest decline in output since the first quarter of 2009 (-6.5 percent) and the largest decline in hours worked since the third quarter of 2009 (-4.4 percent). Productivity had increased in 15 of the 16 quarters between fourth-quarter 2015 and first-quarter 2020.

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