Economists expected a bounce in productivity, and got one, but it was a bit weaker than than the Bloomberg Consensus Estimate of 1.6%. 

 A bounce back for output gave first-quarter productivity a lift, up a quarter-to-quarter 1.3 percent vs a revised decline of 1.1 percent in the first quarter. The bounce in output also held down unit labor costs which rose 0.5 percent vs 2.3 percent in the first quarter.

Output in the second quarter rose 2.8 percent vs a depressed 0.5 percent in the first quarter. Compensation rose 1.8 percent, up from 1.1 percent in the first quarter, while hours worked were little changed, up 1.5 percent vs 1.6 in the first quarter.

Looking at year-on-year rates, growth in productivity is very slight at only plus 0.3 percent while costs do show some pressure, up 2.1 percent in a reading, along with the rise in compensation, that will be welcome by federal reserve officials who are hoping that gains in wages will help offset weakness in commodity costs and help give inflation a needed boost.

Productivity vs. Unit Labor Costs

Productivity Dry Spell

MarketWatch reports Productivity Dry Spell Looks Worse in Latest Report 

 The dry spell of productivity in this economic expansion is even worse than previously thought, according to new data released Tuesday.

The average annual rate of productivity growth from 2007 to 2014 was revised down to 1.3% per year from the prior estimate of 1.4%, the Labor Department said Tuesday.

This is well below the long-term rate of 2.2% per year from 1947 to 2014.

Productivity in 2013 was especially weak, revised down to unchanged from the prior estimate of a 0.9% gain. Productivity even dipped below zero for three quarters in 2013. That hadn't been seen since 1982.

Former Fed chairman Alan Greenspan said Monday that weak productivity is the most serious problem that confronts the U.S.

Federal Reserve Chairwoman Janet Yellen has also called productivity since the recession “disappointing,” even before the downward revisions.

The flipside of the weakness in productivity growth is that it is one reason for the Fed may be eager to get starting raising interest rates in September because weaker productivity lowers potential growth and it doesn't not take much to generate inflation.

There is widespread debate among economists about the causes of weak productivity. Some blame the lack of capital investment. Some question the government's measuring skills.

Joel Naroff, president of Naroff Economic Advisors, said productivity is low because workers have learned that in this expansion working harder doesn't get them anything in return.

“If firms want to drive up productivity, they will have to do it the old fashioned way, by providing incentives to work harder,” Naroff said.