US productivity grew solidly in Q2

WASHINGTON - U.S. business productivity grew by a relatively solid 2.2 percent annual rate during the second quarter as companies boosted output while they cut jobs, a Labor Department report on Friday showed.

By (Reuters)

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Published: Fri 8 Aug 2008, 8:50 PM

Last updated: Sun 5 Apr 2015, 11:51 AM

The second-quarter rise in productivity was weaker than the 2.5 percent gain that economists polled by Reuters had forecast and trailed the first quarter's 2.6 percent increase but helped keep a lid on inflation pressures.

Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, rose 1.3 percent in the second quarter. That was well below the revised 2.5 percent increase registered during the first three months this year.

Compared with the second quarter of 2007, non-farm productivity was up 2.8 percent. That was down from 3.3 percent growth in the first quarter on a year-over-year basis.

In financial markets, the dollar was sharply higher against the euro on Friday as traders worried about prospects for weaker growth in Europe, while Treasury debt prices edged down. U.S. stock futures were little changed.

Analysts said the report suggested that labor costs remained well controlled despite rising prices in other areas of the economy.

"It's not a bad report. The Fed has kept core inflation in check so we don't have a second round knock-on effect," said Robert Brusca, chief economist for Fact and Opinion Economics in New York. "We are seeing weakening unit labor cost; you have a weak labor market, a weakening economy and good Fed policy."

The department said that output grew in the second quarter by 1.7 percent, nearly double the 0.9 percent rise posted in the first quarter. But worker hours were cut back by 0.5 percent after being trimmed 1.6 percent in the first quarter this year.

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