U.S. nonfarm business sector labor productivity decreased at a 0.5-percent annual rate during the first quarter of 2012, a drop after two consecutive quarterly gains, the U.S. Labor Department reported on Thursday.

The government data revealed that the decline in productivity reflects increases of 2.7 percent in output and 3.2 percent in hours worked in the January-March quarter of this year.

Unit labor costs in nonfarm businesses rose 2 percent in the first quarter, while hourly compensation increased 1.5 percent.

From January to March, U.S. manufacturing sector productivity rose 5.9 percent as output grew 10.8 percent and hours worked increased 4.6 percent. The increase in productivity and output were the largest since the second quarter of 2010. Over the last four quarters, manufacturing productivity increased 2.5 percent.

The department upwardly revised productivity growth in the last quarter of 2011 to 1.2 percent.

Productivity measures the amount of output per hour of work. A slowdown in productivity growth can be good in the short term when unemployment is high, if it means companies are reaching the limits on how much extra output they can get from their existing work forces. However, it is a negative sign for the economy if it persists for a long period.