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Productivity growth slows while labor pressures increase

Wednesday, Sept. 7, 2005 | 9:33 a.m.

WASHINGTON -- Growth in Americans' productivity slowed in the spring while labor costs edged up, developments that raise concerns about inflation pressures down the road.

The Labor Department reported today that productivity -- the amount of output per hour of work -- increased at a 1.8 percent annual rate in the April-June quarter, down from a 3.2 percent increase in the first three months of the year and the slowest increase since the summer of 2004.

Labor costs, meanwhile, rose at 2.5 percent rate in the spring, slightly higher than the 2.2 percent rate of increase in the first three months of the year. The Federal Reserve is closely watching the performance of labor costs for any hints that higher wages are making inflation pressures worse.

Labor costs were nearly double from an initial estimate made a month ago, which said that unit labor costs were rising at a more moderate 1.3 percent in the April-June quarter.

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