The productivity of U.S. workers slowed in the first quarter and labor costs rose as companies boosted employment to meet rising demand, Bloomberg reported.

The measure of employee output per hour increased at a 1.8 percent annual rate after a 2.9 percent gain in the prior three months, according to figures released by the U.S. Department of Labor today. Employee expenses climbed at a 0.7 percent rate after dropping 2.8 percent in the prior quarter.

Rising costs of inputs such as energy and components means companies might look to contain labor costs, a sign hiring might not accelerate. A report tomorrow is projected to show employers hired 170,000 workers in May, down from 244,000 in the prior month, according to economists’ estimates.

“Productivity growth has slowed in the past year but from very strong rates and it remains fairly decent,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Bloomberg. “Labor costs have moved higher because of the slowing in productivity growth, but they were generally falling for some time and remain very weak, essentially implying no threat to the inflation outlook.”

Another Labor Department report released today said initial claims for unemployment benefits fell by 6,000 to 422,000 in the week ended May 28. Bloomberg economists had predicted a steeper drop to 417,000 claims.