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Nonfarm business sector productivity—real output per hour of all persons—increased at an annualized rate of 0.5 percent in the first quarter of 2013. This is a slight downward revision from the 0.7 percent increase in the preliminary estimate. The first quarter gain follows a 3.1 percent increase and a 1.7 percent decline in the third and fourth quarters of 2012, respectively, and over the past year, productivity has increased 0.9 percent. The increase in productivity during the first quarter was caused by a 2.1 percent increase in output compared with just a 1.6 percent increase in hours. Since the first quarter of 2012, output is up 2.4 percent while hours have increased 1.5 percent. There was a sharp downward revision to hourly compensation, which declined 3.8 percent (revised down from a 1.2 percent increase).
The same sharp downward revision can be seen after controlling for price changes, as real hourly compensation fell 5.2 percent (revised down from a 0.3 percent increase). However, the decline in real hourly compensation in the first quarter follows a sharp 7.5 percent increase in the fourth quarter of last year, and over the past four quarters, compensation has increased 0.3 percent. Unit labor costs, which are measured as hourly compensation per hourly output, fell 4.3 percent in the first quarter, largely due to the downward revision to compensation. This follows a 1.9 percent decrease and an 11.8 percent increase in the third and fourth quarters of 2012, respectively, and unit labor costs have increased 1.1 percent over the past year.