WASHINGTON, Sept. 6 (Xinhua) -- U.S. productivity increased at an annual rate of 1.6 percent in the second quarter, down from a 4.3-percent pace in the January-March period, the Labor Department reported Wednesday.

    But the increase, the amount of output per hour of work, was slightly better than the gain of 1.1 percent estimated a month ago.

    The slowdown in productivity growth came as wage pressures increased. In the April-June quarter, wages rose at an annual rate of 4.9 percent, up from an initial estimate of an increase of 4.2 percent.

    The gain in the second quarter followed a 9-percent surge in labor costs in the first quarter, which was the biggest quarterly rise in nearly six years. A previous estimate showed that wages increased at a 2.5- percent pace in the first three months.

    The increases in wages, which account for two-thirds of a company's production costs, are good news for workers, but lead the Federal Reserve to worry about inflation.

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

    However, the downside of that increased efficiency is that companies, by getting more output from their existing work force, are able to avoid hiring new workers. Enditem