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WASHINGTON—The first-quarter decline in U.S. labor productivity was less steep than previously thought, though wages grew swiftly over the winter.

Nonfarm productivity, reflecting the amount of goods and services employees produce per hour worked, fell at a 0.6% seasonally adjusted annual rate in the first quarter, the Labor Department said Tuesday. That replaced the agency’s initial estimate of a 1% decline.

The drop largely reflected a slowdown in economic growth in the first quarter tied to weak business investment, global economic woes and a depressed energy sector. Workers’ hours climbed at a faster pace than their output. As a result, the per-unit cost of paying employees to make goods and services shot up.

Economists surveyed by The Wall Street Journal expected the agency to report a 0.6% decline in first-quarter productivity and a 4% rise in unit labor costs.

Productivity is the main factor behind the economy’s ability to lift Americans’ long-term living standards. When companies operate more efficiently, they have more money to spend on investment and salaries, boosting Americans’ wages.

Productivity has slowed sharply since the recession. Productivity grew 0.7% in the first three months of this year compared to the same period a year earlier. That’s down sharply from the post-World War II average growth of 2.2% a year. Weak productivity is believed be a big reason Americans’ wages have grown sluggishly in recent years.

Tuesday’s report hinted at higher wage pressures. Adjusted for inflation, hourly compensation climbed 4.2% instead of the previously reported 3.4%. Also, hourly compensation grew much more quickly in the fourth quarter than previously reported, at a 3.6% rate, instead of 0.9%.

Write to Josh Mitchell at joshua.mitchell@wsj.com and Eric Morath at eric.morath@wsj.com


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