With output increasing at a notably slower than previously reported rate, the Labor Department released a report on Thursday showing that labor productivity in the second quarter fell by much more than had originally been estimated.
The report showed that labor productivity in the second quarter fell by a revised 1.8 percent compared to the previously reported 0.9 percent drop. The drop in productivity during the quarter had been expected to be revised to 1.7 percent.
A smaller than previously reported increase in output contributed to the downward revision to the drop in productivity, which is a measure of output per hour. Output in the second quarter rose by a downwardly revised 1.6 percent compared to the previously reported 2.6 percent growth.
Meanwhile, the report showed a modest downward revision to the pace of hours growth in the quarter, with hours rising by 3.5 percent compared to the 3.6 percent increase that was reported last month.
The drop in productivity in the second quarter compares to the 3.9 percent increase that was seen in the first quarter, which reflected a 5.0 percent increase in output and a 1.1 increase in hours.
Peter Newland, an economist for Barclays Capital, said, "The sharp pick-up in productivity growth around the turn of the year and the subsequent decline reflect the dynamics of the cycle."
"Looking ahead, we doubt that productivity growth will rebound significantly," Newland added, "this is consistent with unit labor costs gradually picking up, a negative for corporate profits but a signal that the economy is moving away from a disinflationary phase."
The Labor Department said that the increase in unit labor costs in the second quarter was upwardly revised to show 1.1 percent growth compared to the more modest 0.2 percent increase that had been reported previously. The upward revision was in line with economist estimates.
In the first quarter, labor costs fell by 4.6 percent, which reflects a notable revision from the 3.7 percent drop that was reported last month.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.