U.S. Productivity Increased in Second Quarter

U.S. workers increased their productivity in the second quarter at a 5.7% rate – more than twice as fast than in the previous quarter, a government report said.

The Labor Department report indicated that the U.S. economy accelerated, even as payrolls fell.

Productivity is the measure of how much an employee produces for every hour of work. The second-quarter increase was the largest of since the third quarter 2002.

In the first quarter, productivity rose by just 2.1%, Labor said.

The U.S. economy grew at a 2.4% rate in the second quarter, a percentage point more than in the first three months of 2003. At the same time, employers cut 170,000 workers, leading to a drop in hours worked. These two factors helped drive the increase in productivity.

Improving demand and falling labor costs may prompt companies to hire more workers, which would help to continue the economic recovery, analysts told Bloomberg.

Another Labor Department report said that initial jobless claims fell by 3,000 last week to 390,000. It was the third straight week that claims were below 400,000, a figure that economists say indicates strengthening in the labor market.

The four-week moving average, a device used to smooth out changes in the weekly reports, fell to 397,250 from 410,000, Labor said.