US productivity rises 1.8% last quarter; labour costs up 2.1%

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US worker productivity improved less than forecast last quarter as the economy rebounded, and labour costs over the last year jumped, a government report showed. Productivity rose at an annual rate of 1.8% after a revised 0.7% gain in the prior quarter that was less than previously forecast, the Labour Department said on Wednesday in Washington. A measure of labour costs increased at a 2.1% pace and was up 4.5% in the 12 months ended in June, the most in almost seven years.

Last quarter's figures were overshadowed by revisions spanning the past three years that trimmed gains and boosted costs. Coming ahead of Tuesday's Federal Reserve meet, the report may reinforce concern among some policymakers that decade-long productivity surge that helped curb inflation is fading."The long-term trends don't look particularly encouraging,'' Julia Coronado, senior economist at Barclays Capital Inc. in New York, said before the report. "Productivity is moving lower, and labor costs are rising. It does reinforce the Fed's view that right now, they need to stay vigilant on inflation.''