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Economic Report: Labor costs, a key driver of U.S. inflation, revised sharply higher in first quarter

Unit-labor costs, a key measure of wage inflation, was revised up to a 12.6% gain in the first quarter from the initial estimate of an 11.6% gain, the Labor Department said Thursday.

Over the past year, labor costs are up 8.2%, the largest four-quarter gain since 1982.

Overall, U.S. first-quarter worker productivity shrank a revised 7.3%, slightly better than the initial estimate of a negative 7.5% rate. This is the largest quarterly decline in productivity since the third quarter of 1947.

Like most government statistics, productivity data has been thrown out of whack by the coronavirus. Economist said the productivity decline in the first quarter was due to the 1.5% drop in first quarter gross domestic product. This drop was mainly driven by trade and not a signal of a weak economy.

In the last four quarters, productivity has fallen 0.6%. 

Output, or share of goods and services produced, was little changed at a decline of 2.3% in the first quarter, down slightly from the initial estimate of 2.4%.

Hours worked were also revised down slightly to a gain of 5.4% from 5.5%.

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