Q2 U.S. productivity rises 2.2%, as hours worked decline

U.S. worker productivity increased a revised 2.2% in Q2, below the consensus estimate, as companies eliminated jobs without hurting output, the U.S. Labor Department announced Friday.

Economists surveyed by Bloomberg News had expected productivity to increase 2.7% in Q2. Productivity increased 2.6% in Q1. In the past 12 months, productivity is up 2.8%.

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 Q2 unit labor costs, a statistic adjusted for increases in efficiency, increased 1.3%. However, in the last 12 months labor costs have increased just 1.5%. Labor costs increased 2.2% and 4.7% in Q1 and in Q4 2007, respectively.

Economists surveyed by Bloomberg News had expected unit labor costs to increase 1.3% in Q2.

Q2 productivity takes some pressure off Fed

Economist Peter Dawson said the adequate Q2 2.2% productivity statistic, although below consensus, will provide argument support for doves on the U.S. Federal Reserve who want to keep interest rates as low as possible to encourage a U.S. economic recovery.

"Productivity is still rising at a healthy pace. That fact, combined will the relatively modest unit labor costs for the second quarter and year, present a picture that inflation is not getting out of control, which is good news for those seeking lower interest rates, and for business executives," Dawson said. "If these productivity and cost trends continue, hawks on the Fed are going to have a hard time making a case for an interest rate increase at the Fed's next meeting."