The productivity of U.S. workers grew at its slowest pace in 18 months in the second quarter, spurring a jump in the growth of unit labor costs from earlier this year.

Nonfarm-business productivity grew at a seasonally adjusted annual rate of 2.9% from April through June, the Labor Department said today.

That followed a 3.7% rise in the first quarter, and was the smallest gain in productivity since the 1.6% increase recorded in the fourth quarter of 2002. In annual terms, the increase was 4.7% in the second quarter.

The second-quarter increase still came in higher than forecast. Economists had expected only a 2% rise in the productivity growth rate.

Unit labour costs, which measure how much companies paid workers for every unit of output they produced, rose 1.9%, the biggest consecutive rise in two years. That followed a 0.3% gain in the first quarter. In annual terms, unit labor costs rose 0.2% in the second quarter; hourly compensation, adjusted for inflation, was up only 0.1%.

Manufacturers of nondurable goods such as food and clothing enjoyed the biggest productivity gains during the quarter at 10.7%, up from a 1.2% gain in the first quarter. Overall, the manufacturing sector saw productivity increase 7.5%, up from 2.8%.

Productivity gains were less impressive in the non-financial corporate sector, rising 6.2% in the first quarter, the latest quarter for which the data were available. That marked a slowdown from a 6.6% rate in the fourth quarter of 2003.