Productivity in the U.S. non-farm business sector rose at an annual rate of 1.7 percent in the first quarter of 2007, down from a 2.1 percent pace in the final quarter of last year, the Labor Department reported Thursday.

Compared with the same period of last year, productivity, the amount of output per hour of work, increased by 1.1 percent in the first three months of this year.

Unit labor costs, or costs of wages and benefits for each unit of output, grew 0.6 percent in the first quarter, following a 6.2 percent rise one quarter earlier. The costs were 1.3 percent above the year-ago level.

The 0.6 percent increase for unit labor costs was the smallest gain since the second quarter of last year.

The slowdown in the growth of labor costs, which account for two-thirds of a company's production costs, was not good news for workers, but was evidence that inflation pressures were easing.

Productivity is the key factor in boosting living standards. Growth in productivity allows companies to pay more to their workers without having to raise the price of their products, which fuels inflation.

For all of last year, productivity was up 1.6 percent, down from a 2.1 percent rise in 2005. Unit labor costs, however, rose by 3.1 percent from a 2 percent gain in 2005.

Source: Xinhua