NEW YORK (CNNMoney.com) -- Worker productivity in the first quarter was much lower than original estimates, according to a government report Wednesday that was in line with the latest Wall Street expectations.
Productivity increased by 1.0 percent in the quarter, down from the original estimate of a 1.7 percent gain, but matching the consensus of economists surveyed by Briefing.com.
The slower economic growth cut into productivity gain, which measures the output of U.S. workers. The gross domestic product, the broadest measure of the nation's economic activity, grew at only 0.6 percent in the most recent report.
But the slower productivity raised inflation concerns, as the unit labor costs rose 1.8 percent in the quarter, up from the 0.6 percent rise in the original estimate. The lower productivity and higher labor costs could keep the Federal Reserve from moving to cut rates to spur the economy in the face of the slowing economy.
"It indicates growth was not so great in the first quarter and that went straight into productivity," Nigel Gault, chief U.S. economist at Global Insight in Waltham, Massachusetts, told Reuters.
"As far as the Fed is concerned, they are not going to be surprised, but this reminds them that wage pressure is still the number one inflation risk, at least domestically," he added.
Planned jobs cuts rise
On the labor front, U.S. employers announced plans in May to eliminate 71,115 jobs, up 32 percent from May 2006 when job cuts totaled 53,716, Reuters said.
It was the second consecutive month in which job cuts increased from the same period a year ago, according to the monthly job-cut report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc., the news agency reported.
Still, year to date, the pace of job cutting remains below last year's level, but the gap is rapidly closing. Heavy downsizing in the computer industry dominated May job cuts, Reuters said.
"Heavy job cutting in the computer industry reflects a slowdown in business spending on new technology. We may continue to see heavy cuts in the months ahead with spending expected to remain soft in the near future," John A. Challenger, chief executive officer at the Chicago-based firm, told Reuters.
A separate report showed rising mortgage rates dampened demand for home loans last week, with an increase in applications for loans to purchase homes overshadowed by a drop in refinancings.
The Mortgage Bankers Association's mortgage application index slipped 1.7 percent to a seasonally adjusted 625.3 in the week ended June 1 as long-term interest rates hit their highest level since October.
-- Reuters contributed to this report 
