U.S. Productivity Collapses

WASHINGTON (MarketWatch) - Productivity of the U.S. non-farm business sector fell at a 0.9% annual rate in the second quarter from a 3.9% gain in the first quarter, the Labor Department estimated Tuesday. Economists were expecting productivity to decline 0.4% in the second quarter. Output increased at a 2.6% annualized rate while hours worked rose 3.6% in the second quarter. Unit labor costs - a key inflationary signal - rebounded at an annual rate of 0.2% in the second quarter after a sharp 3.7% decline in the first quarter. Real hourly compensation was flat. On a year-on-year basis, productivity slowed to a 3.9% increase after a 6.3% rate in the first quarter.

U.S. productivity unexpectedly fell in the second quarter, the first drop in 18 months, amid slower output growth and an increase in labor costs.
Separately, wholesalers' inventories rose in June far less than expected as sales fell, a strong indication that businesses think the economic recovery is tapering.