Productivity fell sharply in the first three months of the year, data released by the government showed Thursday.
Productivity, a measure of worker output per hour worked, fell 2.7 percent in the first quarter. The fourth quarter of last year was revised down slightly from growth of 1.7 percent to 1.6 percent.
Labor productivity tends to decline when businesses are adding workers. The economy added over one million jobs in the first three months of the year, averaging 345,000. Unemployment fell to 3.5 percent.
Unit labor costs, which is a measure of how much businesses pay workers for a given unit of output, jumped 6.3 percent in the first quarter.
Both measures were much worse than expected. Economists had forecast productivity to be flat and unit labor costs to rise just 3.9 percent.