U.S. productivity accelerated in the second quarter but came short of expectations given the sharp rebound in economic output.

The government also revised down its estimates for productivity growth going back to 2004.

Nonfarm business productivity rose at a 1.8% annualized rate between April and June, the U.S. Labor Department said today, up from the first quarter’s rate of 0.7%, which was revised down from 1%.

Last quarter’s productivity gain was below Wall Street expectations of a 2% increase.

Unit labor costs — a gauge of inflationary pressures — rose 2.1% last quarter, following a 3% rise the previous quarter, which was revised up from 1.8%. They were up 4.5% from a year ago, the fastest rise since the third quarter of 2000.

The government also revised down its productivity estimates for previous years following benchmark revisions to gross domestic product data released last month. Nonfarm productivity is now estimated to have grown just 1% in 2006, its slowest rate since 1995 and below the previous estimate of a 1.6% annual increase. Productivity growth in 2005 was revised down to 1.9% from 2.1%, and the 2004 increase was downgraded to 2.7% from 2.9%.

Today’s figures support the prevailing view that the Fed will hold the federal funds rate steady at 5.25% and maintain its anti-inflation bias.

Nonfarm business output grew 4.2% during the second quarter, the Labor Department said. Hours worked rose 2.3%.

Hourly compensation increased 3.9%. Real compensation, adjusted for inflation, fell 2%.

Manufacturing productivity increased 1.6% last quarter, its weakest gain since early 2004.