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U.S. second-quarter productivity raised, wage inflation muted

Cessna employee Nathan Rogers works on a tail section during a tour of the Cessna business jet assembly line at their manufacturing plant in Wichita, Kansas August 14, 2012.

JEFF TUTTLE/REUTERS

U.S. nonfarm productivity increased at a much faster clip than previously thought in the second quarter as businesses squeezed more output from employees, government data showed on Wednesday.

Productivity increased at a 2.2-per-cent annual rate rather than 1.6 per cent, the Labor Department said. Productivity, which measures hourly output per worker, fell at a 0.5 per cent rate in the first three months of 2012.

Economists had expected second-quarter productivity would be raised to a 1.8 per cent rate. The revision reflects an upward adjustment to the country's second-quarter economic growth estimate to a 1.7 per cent pace from 1.5 per cent.

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Businesses emerged from the 2007-09 recession lean and are showing little urgency to ramp up hiring, relying on their existing workforces to meet production.

Output increased at a 2.4 per cent rate in the second quarter instead of the previously reported 2.0 per cent. Output increased at a 2.7 per cent pace in the first quarter.

Productivity grew rapidly as the economy recovered from its steep downturn, peaking at a 6.8-per-cent growth rate in the second quarter of 2009. Gains came as companies cut costs, particularly their wage bills.

The productivity report showed unit labor costs rose at a 1.5-per-cent rate in the second quarter rather than 1.7 per cent. Unit labor costs accelerated at a 6.4 per cent rate in the first quarter.

The revision to the growth in unit labor costs was in line with economists' expectations.

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