Productivity Rate Declines in Second Quarter

U.S. workers’ productivity decreased in the second quarter, the first drop since the end of 2008, the Labor Department said Tuesday.

Productivity slipped at a 0.9% annual rate, following a revised 3.9% gain in the first quarter, Labor said. The first-quarter rate was originally reported as a 2.8% increase.

Productivity is a measure of how much an employee produces for every hour of work.

Economists had forecast a 0.1% rise for the second quarter, Bloomberg reported.

Labor costs rose at a 0.2% rate, less than forecast.

Among manufacturers, productivity jumped at a 4.5% rate, while labor costs at factories fell 6.1% from the first quarter.

When worker efficiency improves at a slower pace and labor becomes more expensive, companies may raise prices in order to guard their profits, contributing to more rapid inflation.