After reporting a sharp pullback in U.S. labor productivity in the previous quarter, the Labor Department released a report on Thursday showing productivity rebounded by more than expected in the first quarter of 2021.

The Labor Department said labor productivity spiked by 5.4 percent in the first quarter after tumbling by a revised 3.8 percent in the fourth quarter of 2020.

Economists had expected productivity to surge up by 4.3 percent compared to the 4.2 percent nosedive that had been reported for the previous quarter.

The rebound in productivity, a measure of output per hour, came as output shot up by 8.4 percent compared to a 2.9 percent increase in hours worked.

“Looking ahead, we expect productivity to strengthen in coming quarters and remain well supported as the economy experiences a mini boom in activity and the labor market lags to overall economic recovery,” said Kathy Bostjancic, Chief US Financial Economist at Oxford Economics.

She added, “Stronger productivity gains should buffer companies’ bottom lines against rising input costs and further boost profit growth this year amid an expected surge in companies’ sales.”

Meanwhile, the report showed unit labor costs edged down by 0.3 percent in the first quarter after soaring by a revised 5.6 percent in the fourth quarter.

Unit labor costs were expected to slump by 1.0 percent compared to the 6.0 percent jump that had been reported for the previous quarter.

The modest decrease in unit labor costs came as a 5.1 percent surge in hourly compensation was offset by the spike in productivity.

Real hourly compensation, which takes into account changes in consumer prices, increased by 1.3 percent in the first quarter.

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