Figures may see Fed keep rates low

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US nonfarm productivity rebounded more strongly than expected in the second quarter, but a sharp slowdown in unit labour costs pointed to still-tame wage pressures that could give the Federal Reserve room to keep interest rates low for a while.

The Labour Department said yesterday productivity increased at a 2.5 per cent annual rate after contracting at a revised 4.5 per cent pace in the first quarter, which was the fastest decline since the fourth quarter of 1981.

Productivity, which measures hourly output per worker, was previously reported to have declined at a 3.2 per cent rate in the first three months of the year.

Economists had forecast productivity rising at a 1.5 per cent rate in the April-June period.

The rebound in productivity follows a bounce back in gross domestic product in the second quarter. The economy grew at a 4.0 per cent rate after shrinking at a 2.1 per cent pace in the first quarter.

The trend in productivity, however, remains sluggish. Compared to the second quarter of 2013, productivity increased 1.2 per cent.

Workers put in more hours in the second quarter, but with output rising, that lowered labour costs.

Unit labour costs, the price of labour per single unit of output, rose at a 0.6 per cent rate after advancing at a revised 11.8 per cent rate, which was the quickest since the fourth quarter of 2012.