WASHINGTON - U.S. non-farm productivity slipped at a 0.5% annualized rate in the first quarter of 2012, after rising a revised 1.2% in the fourth quarter of 2011, the Labor Department reported Thursday.

The declined reflected increases of 2.7% in output and 3.2% in hours worked, the department said.

Unit labor costs, a ratio of hourly compensation to labor productivity, rose 2.0% in the first quarter after rising a revised 2.7% in the previous quarter.

The drop in productivity was on target with the 0.5% decline projected by economists polled by Thomson Reuters. The increase in unit labor costs was less than their median projection of a 2.8% gain.

The 2.7% gain in non-farm business workers' output for the first quarter compared to a revised gain of 3.7% in the previous quarter. The 3.2% increase in hours worked compared to a revised 2.4% gain for the previous quarter.

Hourly compensation rose 1.5%, after rising a revised 3.9% last quarter.

In the manufacturing sector, productivity increased 5.9% in the first quarter, after rising 0.6% in the previous quarter.

Unit labor costs in manufacturing fell 4.2%, after rising a revised 1.3% in the prior quarter.

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