August 8, 2014 8:35 AM, EDT
Productivity Rises in Second Quarter, Following Biggest Drop in 30 Years
George Frey/Bloomberg News

The productivity of U.S. workers rose more than projected in the second quarter, rebounding from the biggest drop in more than three decades and helping to restrain labor costs.

The measure of employee output per hour increased at a 2.5% annualized rate, after a revised 4.5% decrease in the prior three months that was the biggest since 1981, a Labor Department report showed.

The median forecast in a Bloomberg News survey of 57 economists called for a 1.6% advance. Expenses per worker increased at a 0.6% pace, less than estimated.

Companies that have been relying on wringing efficiency gains from existing staff may take on more employees and increase investment as demand grows. Advances in productivity together with limited labor costs provide more room for the Federal Reserve to keep interest rates close to zero while trimming monthly bond purchases.

“As the economy accelerates, productivity will improve,” Sam Coffin, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “We’ll see more hiring.”

Economists’ estimates for productivity ranged from no change to a gain of 4%. The prior quarter’s reading was previously reported as a drop of 3.2%.

The second-quarter reading on productivity was in line with the average of 2.2% over the period spanning 2000 to 2012.