Productivity Rises at 6.8% Rate in Second Quarter

The productivity of U.S. businesses surged in the second quarter, allowing firms to boost output while reducing the overall number of hours worked.

The Labor Department said Thursday that productivity, the measure of how much an employee produces for every hour of work, climbed at a 6.8% annual rate during the second quarter, well above the previously reported 5.7% clip. Economists had expected a 6.2% gain, Reuters said.

Among manufacturers, productivity increased at a 3.7% pace after rising at a 4% rate in the first quarter.

Strong advances in productivity have allowed businesses to increase production without adding workers. Productivity rose at a 2.1% rate of increase in the first quarter of 2003.

Economists say, however, that in the long run strong advances in productivity are good for the economy since improved efficiency is the main building block for better living standards, Reuters reported.

Unit labor costs, a closely monitored gauge of potential wage pressures, fell a revised 2.8%, which analysts said was a good sign for firms struggling to shore up profits, Reuters noted.

Hours worked fell at a 2.3% pace, compared with a 0.7% drop in the first three months of the year. Output rose at a 4.4% rate, compared with a 1.4% gain in the previous three months.

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