US workers were more efficient in the second quarter of 2004, but the rate of productivity growth was the slowest since late 2002.
The Labor Department said non-farm output per worker hour grew at a 2.5 per cent annual rate in the April-June quarter, down from the 2.9 per cent pace initially reported last month and the slowest rate since the fourth quarter of 2002's 1.6 per cent rate.
The number was close to analysts' projections for a 2.7 per cent rate. Still, productivity was down from the first quarter of the year, when it grew at a much faster 3.7 per cent annual clip.
Workers put in more hours and produced less output in the updated figures, leading to the downward revision in productivity. Output was revised to a 3.5 per cent rate in the quarter, down from the initially reported 3.8 per cent pace, while hours worked rose at a 1 per cent rate, up from 0.8 per cent in the original estimate.
Unit labour costs - closely watched by economists as an early warning gauge for inflation pressures - were revised down in the report. Costs gained at a 1.8 per cent pace, off slightly from the 1.9 per cent rate seen in the initial report.
First-quarter unit labor costs were revised sharply lower, to falling at 1.6 per cent rate from rising at a 0.3 per cent pace in the previous report.
The figures should give some comfort to the Federal Reserve, which has embarked on a series of interest-rate increases this year in an effort to forestall inflation as the economy expands. Continued strong productivity gains allow for robust corporate profits or higher worker wages without contributing to inflation.