US revised Q2 productivity down 0.6% vs preliminary reading of down 0.5%

Employees build components for hybrid electric vehicle motors at the Toshiba International manufacturing facility in Houston, Texas.
Matthew Busch | Bloomberg | Getty Images

U.S. labor costs grew much faster than initially thought in the second quarter while worker productivity slumped, which could pressure corporate profits and business spending.

The Labor Department said on Thursday that unit labor costs, the price of labor per single unit of output, increased at a 4.3 percent annual rate as opposed to the 2.0 percent pace reported last month. Economists polled by Reuters had expected that unit labor costs would be revised up to a 2.1 percent rate.

Hourly compensation per hour jumped at a 3.7 percent rate in the second quarter instead of the previously reported 1.5 percent pace. The combination of weaker productivity and rising labor costs hurts corporate profits and could also fan inflationary pressures.

Unit labor costs rose 2.6 percent from a year ago.

Productivity, which measures hourly output per worker, dropped at a 0.6 percent annual rate instead of the 0.5 percent pace of decline reported last month. It was the third consecutive quarterly drop. Productivity fell at a 0.6 percent rate in the first quarter.

Compared to the second quarter of 2015, productivity fell at an unrevised 0.4 percent rate, the fastest pace of decline in three years. Output per worker in the second quarter increased at a revised 1.1 percent rate instead of the 1.2 percent pace reported last month.

The government reported last month that gross domestic product rose at a 1.1 percent annual rate in the second quarter following a 0.8 percent rise in the first quarter.

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