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U.S. worker productivity growth slowed in the second quarter, the Labor Department said on Tuesday.

Nonfarm productivity, which measures hourly output per worker, increased at a 2.3 per cent annualized rate last quarter. Data for the first quarter was revised lower to show productivity rising at a 4.3 per cent rate instead of the previously reported 5.4 per cent pace.

Economists polled by Reuters had expected productivity to rise at a 3.5 per cent rate. Productivity jumped early in the pandemic before slumping in the final three months of 2020, and has since rebounded.

Economists attributed the rapid rise to the hollowing out of lower-wage industries, like leisure and hospitality, which they said tended to be less productive.

Compared to the second quarter of 2020, productivity rose at a 1.9 per cent pace. Hours worked increased at a 5.5 per cent rate last quarter, accelerating from a revised 4.0 per cent growth pace in the January-March period.

Unit labour costs – the price of labour per single unit of output – rose at a 1.0 per cent rate. They contracted at a revised 2.8 per cent pace in the first quarter. Unit labour costs increased at a 0.1 per cent rate from a year ago. They have also been distorted by the pandemic’s disproportionate impact on lower-wage industries.

Hourly compensation rose at a 3.3 per cent rate last quarter. That followed a revised 1.4 per cent growth pace in the first quarter. Compensation increased at a 2.0 per cent rate compared to the first quarter of 2020.

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