A 3.4 percent jump in hourly compensation contributed to the surge in unit labor costs along with the steep drop in productivity. Real hourly compensation, which takes changes in consumer prices into account, fell by 0.3 percent in the first quarter after climbing by 0.7 percent in the fourth quarter. "The decline in productivity in Q1 and continued strong growth in unit labor costs is another sign that inflation will prove stickier than markets anticipate," said Michael Pearce, Lead U.S.