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U.S. Workers Were Less Productive in the Spring

The productivity trends are a sharp reversal from last year, when worker efficiency grew and labor costs fell. Productivity rose 4.1 percent in 2010, the most since 2002. Labor costs, meanwhile, dropped 2 percent, the biggest decline on records dating back to 1948.

The productivity figures were revised for several previous years based on recent updates to the government's estimates of economic growth, which were released late last month. The economy was weaker in 2009 and a bit stronger last year than originally estimated. Growth estimates for the first six months of this year were also marked down.

Economic growth slowed to a 0.8 percent annual rate in the first six months of the year. That's the weakest pace since the recession ended two years ago.

Consumers have cut back on spending in the face of stagnant wages, high unemployment and high gas prices. Supply disruptions stemming from Japan's March 11 earthquake also reduced output, primarily in the auto sector.

Employers responded by cutting back on hiring. They added an average of only 72,000 jobs per month from May through July. That's far fewer than the average of 215,000 per month added in February through April.

Growing fears that the country could be on the verge of another recession, concerns about the European debt crisis and the first-ever downgrade of U.S. debt have caused the stock market to plummet by about 15 percent in the past 2 ½ weeks.

The Federal Reserve, which is meeting on Tuesday, watches productivity and unit labor costs carefully. Since increases in productivity allow companies to pay workers more without raising the prices of their products, productivity gains can help keep inflation at bay.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Read More:   recession, unemployment
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