Analysts predicted productivity, which grew at a seasonally adjusted annual rate of 2.2 percent, to grow 1.7 percent in the second quarter. The consensus forecast for increases in labor costs was at a seasonally adjusted annual rate of 2.6 percent but labor costs increased 2.2 percent during the quarter, the U.S. Bureau of Labor Statistics said Wednesday.

Labor cost increases of 1.9 percent in the business sector and 2.2 percent in the non-farm business sector "were due primarily to declines in hours worked," the report said.

The decline in hours translates to less expense for businesses, but also to less money workers have to available to spend, which drags on the economy.