WASHINGTON - U.S. non-farm productivity fell 0.3% on an annualized basis in the second quarter, after a revised 0.6% decline in the first quarter, the Labor Department reported Tuesday.
Unit labor costs, a ratio of hourly compensation to labor productivity rose 2.2% in the second quarter, down from the revised 4.8% growth in the first.
Workers' output was up 1.8%, compared to a 0.9% gain in the first quarter. Hours worked were up 2.0%, after a revised 1.5% rise the prior quarter.
Hourly compensation rose 1.9% after a revised 4.2% increase.
Economists expected productivity to fall 0.8% and unit labor costs to increase 2.3% according to the median estimate from Thomson Reuters.
In the manufacturing sector, productivity fell 2.0% in the second quarter compared to a 4.2%decline in the first quarter. Unit labor costs rose 4.4% in the second quarter vs. a 1.1% drop in the first.
A slowing productivity trend "bodes well for job growth should output pick up," said BMO Capital Markets economist Michael Gregory before the report. Companies could be reaching the limits of output increases based on productivity and overtime, and may have to begin hiring again.
Data in the Tuesday release reflect multi-year revisions to the GDP accounts. published July 29. For the year 2010, productivity was revised up to 4.1% growth from 3.9% growth. Unit labor costs fell 2.0%, the biggest decline since the annual data series began in 1948.
For 2009, productivity growth was revised down to 2.3% growth from the previous estimate of 3.7% growth. Unit labor costs fell 0.7% from a marginally smaller decline reported earlier the Labor Department said.
