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Economic Report: U.S. productivity rose by 5.4% pace in first quarter as economy rebounded

The productivity of American workers rose at a 5.4% annual pace in the first quarter, reflecting a big increase in output as companies ramped up operations to keep up with an accelerating U.S. recovery.

The increase in productivity was unchanged from its original estimate of 5.4%.

Output, or the amount of goods and services produced, climbed at a 8.6% annual pace in the first three months of the year, the government said Thursday. That was little changed from the initial reading.

Hours worked rose at a smaller 3% annual rate, the government said Thursday.

Productivity is determined by the difference between output and hours worked.

The amount of wages and benefits paid to employees rose by a sharp 7.2% pace, but the strong increase in productivity allowed companies to keep costs under control.

Unit-labor costs rose at a mild 1.7% annual pace in the first quarter. Initially the government had reported that costs had declined 0.3%.

Read: Why aren’t Americans happier about the economy? They are paying higher prices for almost everything

Like many other measures of the U.S. economy, productivity was thrown out of whack during the pandemic and the numbers are only now starting to return to normal. It will probably be another year or so before the report can be taken at face value.

Higher productivity is a sign of a very healthy economy. Before the pandemic productivity was growing below its historic average, but some economists think it could speed up in the next few years.

Companies have learned how to get by with fewer workers and they are investing more in automation and other technology to boost production, especially in industries such as construction and manufacturing in which labor shortages predate the pandemic.

Read: Hiring signs are everywhere, but Wall Street isn’t betting on huge job gains in May

For now businesses are trying to hire more workers, but many complain they can’t find enough people with the skills they need to fill a record number of open jobs.

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