U.S. productivity growth slowed in the first quarter of 2024, casting doubt on the American economy’s future growth, according to data released by the Bureau of Labor Statistics (BLS) on Thursday.
Growth in U.S. business productivity slowed to just 0.3% in the first quarter of 2024, below economists’ predictions of 0.5% and far lower than the 3.5% rate of growth achieved in the fourth quarter of 2023, according to the BLS. Sluggish growth in productivity bodes poorly for broader gross domestic product (GDP) growth, which slowed to 1.6% in the first quarter of 2024.
Business productivity growth for the year totaled 2.9%, according to the BLS. Unit labor costs surged in the first quarter by 4.7% due to a 5% increase in hourly compensation despite low productivity growth.
Productivity growth in the manufacturing sector was slightly lower at 0.2% in the quarter, with nondurable manufacturing productivity declining 1.3%, according to the BLS. In total, manufacturing sector labor productivity only grew by 0.3% in the last year.
U.S. productivity growth remained mostly strong in 2023, growing above 3% in every quarter except the first, when it declined by 0.3%, according to the BLS.
Persistent elevated levels of inflation and high interest rates have weighed on businesses’ ability to invest to increase productivity, with inflation measuring most recently at 3.5% in March, far higher than the Fed’s 2% target. The cost of obtaining credit has increased dramatically in the past two years due to hikes in the Federal Reserve’s federal funds rate, which currently sits in a range of 5.25% and 5.50%, a 23-year high.
Slow growth and high inflation have stoked fears that the U.S. economy is either entering or currently in an era of stagflation, a phenomenon which wreaked havoc on American consumers in the 1970s and 1980s. Jerome Powell, chair of the Fed, disputed stagflation claims on Wednesday following the Federal Open Market Committee’s May rate announcement, citing decelerating inflation metrics and strong growth in underlying portions of GDP data.
The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.
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