The Labor Department this morning estimated that productivity of the U.S. nonfarm business sector increased at a 2.2% annualized rate during the first quarter. Economists predicted productivity to increase by 1.8%. First-quarter output in the nonfarm business sector increased 0.4%.

Meanwhile, unit labor costs, which generally gauge wage-related inflationary pressures, also rose at a 2.2% annual rate in the quarter; economists had forecast a 2.6% jump. Year-over-year, unit labor costs rose 0.2% - the slowest pace since 2004.

Hours worked during the first quarter declined 1.8%, marking the biggest drop in 5 years, while real hourly compensation rose 0.1% in the last quarter. On a year-over-year basis, hours worked fell for the second consecutive quarter, which many economists believe is a sign associated with recession.

Taking a look at the manufacturing sector, productivity increased 4.1% during the first quarter, while unit labor costs rose 2.5%. Output in the sector fell 0.3%, while hours worked dropped 4.2%.

Elsewhere, fourth-quarter productivity was revised to a 1.8% increase from previous guidance of a 1.9% increase. Fourth-quarter unit labor costs were revised to an increase of 2.8%, rather than the original 2.6% rise.