U.S. workers’ productivity fell during the first three months of the year. The drop in productivity could signal that companies can’t squeeze more output from their existing workers and must hire to meet rising demand.

The Labor Department says productivity fell at an annual rate of 0.5 percent in the January-March quarter, the biggest drop in a year. It had increased at an annual rate of 1.2 percent in the previous quarter.

Labor costs rose at a rate of 2 percent during the first quarter, slightly slower than the 2.7 percent increase in the fourth quarter.

Productivity is the amount of output per hour of work. It grew last year at the slowest pace in nearly a quarter century after rising sharply in the previous year.