Economists looking for an annual growth of 2.8 percent in the second quarter

MarketsAssociated Press

The Labor Department reports on productivity for the April-June quarter at 8:30 a.m. Eastern Wednesday.

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PRODUCTIVITY UP: Economists expect an annual growth of 2.8 percent in the second quarter, according to a survey by the data firm FactSet.

SLOWER PRODUCTIVITY: A month ago, the government reported that productivity grew at an annual are of 1.3 percent in the second quarter after falling at a 1.1 percent rate in the first quarter.

Economists expect the second quarter figure will be revised higher given that the economy's total output, as measured by the gross domestic product, was revised up significantly. The government revised up its initial 2.3 percent estimate for GDP growth to 3.7 percent.

The estimate of labor costs is expected to slow labor costs falling at an annual rate of 0.7 percent in the second quarter, indicating that by this measurement there are no wage pressures building even as the unemployment rate has fallen to a seven-year low of 5.3 percent currently.

Productivity, the amount of output per hour of work, has been sluggish since the recession and economists have been at a loss to explain the reason for this weakness.

Weak productivity can boost hiring in the short run as companied have to add more workers to boost output. But it holds back wage growth. Faster productivity growth allows employers to boost pay without pushing up inflation.

Over the past year, productivity has expanded just 0.3 percent, far below the long-run average of 2.2 percent.

Productivity has risen an average of just 1.3 percent a year from 2007 through 2014.

That is far below the strong 2.8 percent average annual growth that occurred from 1995 through 2004, gains that economists attributed to efficiency boosts the economy was getting from more widespread use of computers and the Internet.

Some experts believe that improvements in software and other high-tech products are not being accurately measured in the government's statistics. But other economists argue that companies are failing to fully exploit the efficiency gains offered by smartphones, computer tablets and other recent innovations.