U.S. Business Productivity Declines 1.2%

U.S. business productivity fell 1.2% in the first quarter of 1985, the Labor Department reported today, signaling a disturbing slowdown in economic growth and raising some concern among analysts over inflation.

Unit labor costs, reflecting changes in productivity and hourly compensation, spiraled upward 7.3%.

“It looks like the magic of Reagan economics is gone, certainly in those particular numbers,” said David Jones, chief economist at Aubrey G. Lanston Co. Inc. The recovery, which began in the last three months of 1982, has been marked generally by low inflation, strong real growth and substantial increases in productivity.

Commerce Department figures released last week showed the economy grew at an anemic annual rate of 1.3% in the first quarter of 1985.

The productivity decline was the first since the third quarter of 1984, and the jump in unit labor costs was the biggest since the second quarter of 1982.

Output was up 1.6% for the quarter, but hours worked were up 2.9%, and hourly compensation rose 6%--the largest increase in a year. About 0.4 of a percentage point of the rise in hourly compensation resulted from increases in Social Security contributions.