U.S. non-farm productivity up 6.6 pct in 2nd qtr

WASHINGTON, Sept 2 - U.S. non-farm productivity was stronger than initially thought in the second quarter as companies slashed costs to protect profits, data showed on Wednesday.

The Labor Department said non-farm productivity rose at a 6.6 percent annual rate, rather than the 6.4 percent pace it reported last month. That was the biggest increase since the third quarter of 2003.

Productivity rose at a 0.3 percent pace in the first quarter.

Analysts polled by Reuters had forecast productivity, which measures the hourly output per worker, rising at a 6.4 percent rate in the second quarter.

Despite the increased productivity, output fell at a 1.5 percent rate in the second quarter, the department said, unchanged from its previous estimate, as over 6 million jobs have been cut since the recession began in December 2007. Output, measured on a year-on-year basis, was 5.5 percent lower.

Compared with the same quarter last year, non-farm productivity was up 1.9 percent.

Hours worked fell at a 7.6 percent rate in the April-June period from the first quarter, unchanged from last month's estimates. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Federal Reserve, fell 5.9 percent, the biggest decline in nine years.

Analysts had expected unit labor costs to fall 5.8 percent in the second quarter. Unit labor costs dropped 5 percent in the January-March quarter. Unit labor costs fell 1.2 percent year-on-year.

Compensation per hour rose at a 0.3 percent pace rather than 0.2 percent as reported last month and, adjusted for inflation, was down 1 percent instead of a 1.1 percent decline. Compensation from a year ago rose 0.7 percent and was up 1.6 percent once adjusted for inflation.