The productivity of U.S. businesses fell in the second quarter, the government said Tuesday, while first-quarter figures were revised lower to show a decline as labor costs accelerated.

Second-quarter productivity fell by a 0.3 percent annual rate on a seasonally adjusted basis, according to the Labor Department. Productivity in the first quarter was revised lower to a 0.6 percent decline instead of a 1.8 percent increase.

The economy hasn't experienced two straight drops in productivity since the second half of 2008. The government also revised productivity for the prior three years, showing a higher increase in 2010 and lower gains in 2009 and 2008.

Economists surveyed by MarketWatch had expected productivity to decline by 0.9 percent in the second quarter.

The unit cost of labor, meanwhile, rose by a 2.2 percent annual rate on top of a 4.8 percent increase in the first quarter. Unit labor costs had been forecast to climb 2.6 percent.

Unit labor costs reflect how much it costs a business to produce one unit of output, such as a ton of steel. In the past 12 months, unit labor costs are 1.3 percent higher.

Productivity fell in the three months through June because the number of hours that employees worked rose faster than the amount of goods and services generated.

The quantity of goods and services produced, known as real output, grew at an annual rate of 1.8 percent in the second quarter. Hours worked, however, rose 2.0 percent.

In the manufacturing sector - the strongest segment of the U.S. economy in the past two years - the difference was even greater. Output edged up 0.6 percent while hours worked jumped 2.6 percent, reflecting the inability of companies to meet demand with their existing work forces. They would have had to either hire more workers, which they did, or ask employees to work more overtime.

In the short term, lower productivity could signal that businesses need to hire more workers - a good thing in an economy with persistently high unemployment. Yet persistently lower productivity usually means small pay increases for workers, less hiring and a weaker economy.

In the long run, strong productivity is widely regarded as the key to a rising standard of living because it tends to lead to higher pay for workers and larger profits for companies.

Although compensation per hour rose 1.9 percent at an annual rate, hourly wages adjusted for inflation actually fell 2.1 percent. The decline reflects the higher cost of living tied to increases in the price of necessities such as gasoline and food.

In its annual revisions, the Labor Department said productivity in 2010 grew by 4.1 percent instead of a previously reported 3.9 percent.

For 2009, the gain in productivity was revised down to 2.3 percent, from 3.7 percent previously, and for 2008, it was lowered to a 0.6 percent increase from 1.0 percent.