U.S. Productivity Slides In Second Quarter

Workers' productivity slowed abruptly to grow by just 1.1% in the second quarter, the Labor Department said Aug. 8. The figure, however, was a little better than Wall Street's forecast for a 0.9% clip.

The weaker reading, which backs other reports suggesting a slowdown in the economy, came just hours before many economists expect the Federal Reserve to announce it is suspending its long cycle of interest rate hikes.

The government revised up productivity for the first quarter to 4.3% from a prior estimate of 3.7%. Productivity rose 2.4% in the second quarter compared with a year ago.

Productivity, while complex to measure, is seen as an essential factor in long-term economic health, allowing companies to reap higher profits while giving workers higher pay without raising prices.

Unit labor costs -- a key inflation gauge -- rose 4.2% in the second quarter compared with a gain of 2.5% in the prior quarter.

Copyright Agence France-Presse, 2006

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