WASHINGTON: U.S. nonfarm productivity fell less than expected in the second quarter, government data showed on Tuesday, while a moderation in the pace of unit labor costs growth suggested inflation pressures will remain contained.
Productivity slipped at a 0.3 percent annual rate, the Labor Department said, after falling at a revised 0.6 percent pace in the first quarter.
Economists had expected productivity to drop at a 0.8 percent rate. Revisions to prior quarters showed productivity growth was slightly stronger in 2010 than earlier reported.
The slowdown in productivity mirrors a sharp slowdown in economic growth during the first half of the year, which has raised fears the economy could slide into recession. The economy grew at a 1.3 percent annual rate in the second quarter after a meager 0.4 percent rise in the January-March period.
Normally, a slowdown in productivity implies that businesses have to add new workers to meet production, but against the backdrop of weak economic growth, it suggests businesses might have to cut costs to protect profits.
Productivity -- which measures hourly output per worker - grew rapidly as the economy emerged from the 2007-09 recession, peaking at an 8.0 percent growth rate in the second quarter of 2009. The gains were driven by companies' cutting costs, particularly for labor.
The productivity report showed unit labor costs grew at a 2.2 percent rate in the second quarter, which was slower than the 4.8 percent pace in the first quarter. Revisions showed unit labor costs contracted more sharply in 2010 than previously estimated.
Economists had expected unit labor costs to rise 2.3 percent in the second quarter. ' Reuters
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Productivity slipped at a 0.3 percent annual rate, the Labor Department said, after falling at a revised 0.6 percent pace in the first quarter.
Economists had expected productivity to drop at a 0.8 percent rate. Revisions to prior quarters showed productivity growth was slightly stronger in 2010 than earlier reported.
The slowdown in productivity mirrors a sharp slowdown in economic growth during the first half of the year, which has raised fears the economy could slide into recession. The economy grew at a 1.3 percent annual rate in the second quarter after a meager 0.4 percent rise in the January-March period.
Normally, a slowdown in productivity implies that businesses have to add new workers to meet production, but against the backdrop of weak economic growth, it suggests businesses might have to cut costs to protect profits.
Productivity -- which measures hourly output per worker - grew rapidly as the economy emerged from the 2007-09 recession, peaking at an 8.0 percent growth rate in the second quarter of 2009. The gains were driven by companies' cutting costs, particularly for labor.
The productivity report showed unit labor costs grew at a 2.2 percent rate in the second quarter, which was slower than the 4.8 percent pace in the first quarter. Revisions showed unit labor costs contracted more sharply in 2010 than previously estimated.
Economists had expected unit labor costs to rise 2.3 percent in the second quarter. ' Reuters
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