US worker productivity increased in the second quarter by more than forecast, helping temper growth in labor costs and adding to evidence of diminishing inflationary pressures.

Productivity, or nonfarm business employee output per hour, rose at a 2.3% annualized rate in the April-to-June period after rising only slightly during the first three months of the year, data from the Bureau of Labor Statistics showed Thursday.

Unit labor costs, or what a business pays employees to produce one unit of output, increased at a 0.9% rate in the April-to-June period after climbing 3.8% at the start of the year.

Revisions to the first quarter also show a trend of improving productivity helping to keep a lid on pay growth. That was evident in the annual figures, too — on a year-over-year basis, productivity increased 2.7% in the second quarter, after rising the most in three years. Unit labor costs were up 0.5%, the smallest advance since before the pandemic.

Productivity figures are prone to wide swings on a quarterly basis, but the overall improvement in the past year suggests companies are stepping up efforts to alleviate the impact of elevated operating costs. Despite high borrowing costs, business investment has held firm, supporting long-term economic growth.

The report offers the Federal Reserve further evidence that the risks of a reacceleration in inflation are diminishing. While officials on Wednesday kept interest rates unchanged at a more than two-decade high, Chair Jerome Powell said a cut could come as soon as September.

“The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market,” Powell told reporters after the policy decision. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”

The BLS data showed output increased 3.3% in the second quarter, an improvement from tepid economic growth at the start of the year. Hours worked picked up, while hourly compensation growth eased.

Separate data Thursday showed initial applications for US unemployment benefits jumped to the highest level in almost a year, boosted by states like Michigan and Missouri that have several car factories which undergo an annual retooling period around this time of year.

This article was provided by Bloomberg News.