Productivity in the U.S. nonfarm business sector rose at an annual rate of 1.0 percent in the first quarter of 2007, down from a 2.1 pace in the final quarter of last year, the Labor Department reported Wednesday.

The revised 1.0 percent pace was below the 1.7 percent growth rate estimated one month ago and the slowest advance since the third quarter of last year.

Compared with that in the same period of last year, productivity, the amount of output per hour of work, grew at 1.0 percent in the January-March period of this year.

The gain was small comparatively. Nonfarm business productivity has increased at an average annual rate of 3.1 percent from 2000 through 2005.

Unit labor costs, or costs of wages and benefits for each unit of output, grew at an annual rate of 1.8 percent in the first quarter.

That was up from an initial estimate of 0.6 percent growth in unit labor costs but was still much lower than the 8.9 percent surge in the final quarter of last year.

The costs in the first quarter were 2.2 percent above the year-ago level.

The slowdown in growth for labor costs, which account for two-thirds of a company's production costs, was not good news for workers, but was evidence that inflation pressures were easing.

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 will fuel inflation.

The revision to productivity in the first quarter reflected the sharp downward revision to overall economic growth, according to analysts.

In the first three months, the economy expanded at an annual rate of just 0.6 percent, slower than an initial estimate of 1.3 percent and the slowest since the fourth quarter of 2002.