Productivity Jumps, Unit Labor Costs Decelerate

- Preliminary 2Q Non-farm Productivity rose 1.8% versus estimates of a 2.0% gain and a .7% increase in 1Q.

- Preliminary 2Q Unit Labor Costs rose 2.1% versus estimates of a 1.8% gain and an upwardly revised 3.0% increase in 1Q.

BOTTOM LINE: US worker productivity gained less than forecast in the second quarter and labor costs rose, Bloomberg said. Unit labor costs, which comprise two-thirds of inflation, rose 2.9% in 2006, revised down from a prior estimate of 3.3%. The pick-up in 2Q productivity reflected the strong surge in economic growth to above trend rates from 1Q’s sluggish performance. I continue to believe productivity will trend at above average rates long-term, while unit labor cost increase remain subdued.