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Productivity rose 2.1% in the 2nd quarter in U.S.

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WASHINGTON — Worker productivity, a key measure of living standards, rose in the second quarter as businesses, coping with the yearlong economic slowdown, laid off workers and slashed hours.

Productivity — the amount of output per hour of work — rose at an annual rate of 2.1 percent in the April-June quarter, according to revised figures released Wednesday by the Labor Department.

The new estimate is slower than the 2.5 percent growth rate the department reported a month ago, but largely matched many analysts' expectations. It was the best showing since productivity rose at a rate of 2.3 percent in the fourth quarter of last year.

On Wall Street, stocks fell. The Dow Jones industrial average lost 32 points and the NASDAQ was off 14 in the first hour of trading.

Productivity rose in the second quarter as businesses cut workers' hours at a 2.6 percent rate, the biggest drop since the first quarter of 1991. Output fell at a rate of 0.5 percent, the first decline since the first quarter of 1993 when the country was emerging out of its last recession.

In response to sagging demand, businesses have laid off thousands of workers, with the manufacturing industry, hardest hit by the slowdown, cutting payrolls by more than 800,000 in the 12 months ending in July.

Economists were expecting a downward revision to productivity because the economy also had grown far more slowly in the second quarter than the government had initially thought. Last week, the government reported the economy grew at its slowest pace in eight years, barely expanding at a 0.2 percent rate, versus the 0.7 percent growth rate originally reported.

Gains in productivity are the key to rising living standards because they allow wages to increase without triggering inflation that would eat up those wage gains. If productivity falters, however, pressures for higher wages could force companies to raise prices, thus worsening inflation.

Even with the downward revision, productivity's 2.1 percent growth rate in the second quarter was still quite healthy and marked a big improvement over the first quarter's meager 0.1 percent rate of advance.