Labor productivity in the U.S. rose by more than expected in the second quarter, according to a report released by the Labor Department on Wednesday, although the report also showed a sharper than expected jump in labor costs.
The report said productivity increased by 1.6 percent in the second quarter following a revised 0.5 percent drop in the first quarter.
Economists had been expecting productivity to increase by about 1.3 percent compared to the 0.9 percent decrease originally reported for the previous quarter.
The bigger than expected increase in productivity, which is a measure of output per hour, came as output increased by 2.0 percent compared to a much more modest 0.4 percent increase in hours worked.
Compared to the same quarter a year ago, productivity was up by 1.1 percent, as output and hours worked rose 2.9 percent and 1.8 percent, respectively.
At the same time, the Labor Department said that unit labor costs rose by 1.7 percent in the second quarter compared to economist estimates for a 0.9 percent increase.
The report also showed a substantial upward revision to the pace of unit labor cost growth in the first quarter, with costs surging up by 5.6 percent compared to the 1.3 percent growth previously reported.
Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said, "The large upward adjustment to Q1 ULC had been signaled by the annual revision to the national income accounts."
"The surge appears to have reflected discretionary bonus income rather than more inflationary wage rates or other costs," he added. "And while the Q2 pace was above consensus, it was roughly in line with the trend in goods and services inflation."
The increase in unit labor costs in the second quarter reflected a 3.3 percent increase in hourly compensation, which followed a 5.1 increase in the first quarter.
Despite the notable increases seen over the past two quarters, unit labor costs were up by a relatively modest 0.8 percent compared to the same quarter a year ago.
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