U.S. labour productivity slowed down in the second quarter and worker costs grew at a much slower rate than in the first three months of the year, the U.S. Labor department said today.

Nonfarm business productivity grew at a seasonally adjusted annual rate of 2.2% from April through June, down from the revised 3.2% rate in the first quarter, the department said.

Economists had called for nonfarm productivity to rise by 2% following a 2.9% rate of increase in the first quarter.

Meanwhile, unit labor costs grew at an annual rate of 1.3% in the second quarter, the slowest increase in a year. Unit labor costs in the first quarter grew at a revised 3.6% rate.

The report showed workers; hourly compensation fell during the second quarter. Adjusted for inflation, compensation per hour fell at a 0.6% rate during the second quarter, compared with a revised 4.5% annual growth rate the previous quarter.

Output growth edged up slightly to a 4.4% annual rate in the second quarter from a revised 4.3% in the first quarter. Workers; hours rose to a 2.1% growth rate in the second quarter from a 1.1% a rate in the previous quarter.

The department also lowered its estimates for productivity growth in the past three years to reflect revisions in the gross domestic product announced late last month. Productivity grew by 3.4% last year rather than the previously reported 4% gain. Productivity growth in 2003 was lowered to 3.8% instead of 4.3%, and to 4% in 2002 rather than the previously reported 4.3%.