U.S. Q1 productivity accelerates to 2.6%, better than expected

U.S. worker productivity increased a revised 2.6% in Q1 2008, above the consensus estimate, as companies eliminated jobs without hurting output, the U.S. Labor Department announced Wednesday.

Economists surveyed by Bloomberg News had expected productivity to increase 2.5% in Q1 2008. Productivity increased 1.8% in Q4 2007.

Productivity measures output per hour worked. Economists say rising productivity usually leads to increases in income, as businesses can increase salaries/wages paid without increasing their per unit costs.

Meanwhile, unit Q1 2008 labor costs, a statistic adjusted for increases in efficiency, increased 2.2%. Labor costs increased 4.7% in Q4 2007.

Economists surveyed by Bloomberg News had expected unit labor costs to increase 1.9% in Q1 2008.

During Q1 2008, hours worked fell at a 1.8% annualized pace.

Economic Analysis: A strong productivity report. The nation's workforce continues to become more efficient, which is a good sign given increasing business costs in other areas -- raw materials, commodities, energy, and transportation costs, etc. As in 2007, for the first quarter of 2008, companies did a good job increasing productivity while containing employee costs amid sluggish business conditions.