The U.S. witnessed a slide in its worker productivity in the first quarter of the year. In the non-farm business sector, the seasonally adjusted annual rate of productivity growth fell by one percent. However, in comparison to the same period in the previous year, the rate is marginally up by 0.6 percent. It also did better than expected as markets predicted the productivity rate to fall by 1.4 percent.

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Worker productivity, as defined by goods and service produced for each hour of labor, declined, forcing companies to pay more in wages. The likely cause of the decline in productivity is the global economic slump.

Speaking with the Wall Street Journal, Joshua Shapiro, chief U.S. economist at consultancy MFR Inc., said, "For productivity growth to pick up, output has to pick up. We need stronger demand. I don't see where that's going to come from in the global economy."

Weak productivity data also explains the anomaly between the strong labor market and lagging economic growth. A large part of growth is being fueled by new job creations while actual productivity is declining.

In the first quarter of the year, hours worked increased by 1.5 percent while growth in unit labor cost stood at 4.1 percent. Unit labor cost is used for determining compensation costs. Higher wages may lead to lower profit margin for the corporations.

The decline in productivity is not affecting the U.S. alone. A similar trend has been seen in various countries including member countries of the Organization for Economic Cooperation and Development (OECD). The UK has also slashed its economic growth forecast for the next five years. In 2016, UK economy is now expected to grow by 2.2 percent, down from previous estimation of 2.5 percent.

TagsUSA, UK, OECD, Productivity Growth