Worker Productivity Slows

WASHINGTON (AP) -- The efficiency of America's workers grew at a slightly slower pace in the spring as companies sought to produce more with leaner work forces. Workers' compensation growth slowed, too.

The Labor Department reported Friday that productivity - the amount an employee produces for every hour on the job - grew at a rate of 2.2% during the April-to-June quarter. That was down from a 2.6% growth rate logged in the first three months of this year.

Economists were forecasting productivity to have risen 2.5%, according to a consensus of economists surveyed by Briefing.com.

Meanwhile, growth in compensation - wages and benefits - also slowed as companies were less generous amid troubles in the economy and uncertainty about their own prospects.

Unit labor costs slipped to a 1.3% pace in the second quarter, from a 2.5% growth rate in the first quarter. Unit labor costs is a measure of how much companies pay workers for every unit of output they produce. Economists look to this barometer for clues about inflation.

The showing on compensation matched economists' expectations.

The economy grew at a 1.9% pace in the second quarter, up from a 0.9% growth rate in the first three months of this year. The economy's growth rate reflects the value of all goods produced in the United States.

During the second quarter - as has happened all year - employers cut jobs. Nearly a half million jobs have disappeared during the first seven months of the year.

Companies have been trimming their payrolls and trying to satisfy customer demand with fewer workers as they cope with fallout from the housing and credit debacles, along with high prices for fuel and other raw materials.

Confronted by problems at every turn - shaky growth, rising unemployment and gyrating food and energy prices, the Federal Reserve earlier this week decided to hold a key interest rate steady. The central bank can't afford to lower the rate anymore because it could worsen inflation. On the other hand, boosting rates too soon would hinder the economy and the already crippled housing market.