June 4 (Bloomberg) -- U.S. worker productivity in the first quarter accelerated more than previously estimated as companies cut jobs without losing output.

Productivity, a measure of efficiency, rose at a 2.6 percent annual rate the first three months of the year, the Labor Department said today in Washington. Last month, the government estimated a 2.2 percent gain, following at 1.8 percent increase in the fourth quarter.

Companies are trying to limit labor costs, including trimming staff hours at the fastest pace in five years, as they face soaring raw material costs and slower sales. UAL Corp.'s United Airlines, the world's second-largest carrier, said today it will eliminate as many as 1,100 more jobs to help counter record fuel costs.

``Productivity growth is proving to be quite robust,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland. ``Slackening in the labor market is likely to continue to take the edge off compensation costs.''

Employee expenses account for more than two-thirds of the cost of producing a good or service.

Labor costs climbed at a revised 2.2 percent pace, the same as estimated last month and down from a 4.7 percent increase the last three months of 2007.

Economists forecast productivity would rise at a 2.5 percent annual pace, according to the median of 66 projections in a Bloomberg News survey. Estimates ranged from 1.8 percent to 2.7 percent.

ADP Report

A private report today indicated that companies in the U.S. unexpectedly added jobs in May by the most since January. The 40,000 increase followed a revised gain of 13,000 for the prior month that was more than previously estimated, the report from ADP Employer Services showed.

Unit labor costs, which are adjusted for the changes in efficiency, were forecast to rise 2 percent, according to the Bloomberg survey. Estimates ranged from gains of 0.7 percent to 3.5 percent.

While wage increases have decelerated, pressures from energy and other raw-material costs have raised concern companies will boost prices to protect profits. Crude oil futures prices closed at a record $133.17 a barrel on the New York Mercantile Exchange on May 21.

Delta Cuts

Delta Air Lines Inc. said May 30 that more than 3,000 employees have taken voluntary severance offers, at least 1,000 more than the carriers target had been in March when it announced plans for reducing jobs and grounding planes. Most of the employees, including flight attendants and gate workers, will leave in September.

``This gives us the flexibility to adjust to record fuel prices,'' Delta spokesman Kent Landers said. He also said that Delta may hire other workers to fill positions in operational areas if needed.

Federal Reserve Chairman Ben S. Bernanke yesterday raised his biggest concerns yet about the inflationary effects of the dollar's 16 percent drop in the past year against the euro and signaled he's done cutting interest rates for now. He also noted the risk that higher commodity prices will add to inflationary pressures.

Among manufacturers, productivity increased at a 3.6 percent pace from January through March following a 4.2 percent gain in the fourth quarter.

GM Departures

General Motors Corp. said May 29 that about 26 percent of its union workforce accepted the latest offer to leave the company and help clear out its highest-paid factory workers. About 19,000 of GM's United Auto Workers members signed up for the buyout packages and most will stop working July 1, GM said in a statement.

The automaker this week announced that it will close four truck plants, make more small cars, and may drop its Hummer brand of large sport-utility vehicles.

The U.S. economy expanded at a 0.9 percent annual pace in the first quarter, Commerce said on May 29. While that was faster than previously estimated, the pace of growth over the six months ended in March was the weakest in five years.

Hours worked, as measured in today's report, dropped at a 1.8 percent rate annual pace, the most since the first three months of 2003.

Year's Losses

The Labor Department is scheduled to release its May payrolls report on June 6. The U.S. lost 260,000 jobs from January through April.

Compared with a year earlier, productivity climbed 3.3 percent, the most in almost four years. Unit labor costs were up 0.7 percent from the same quarter a year ago, the smallest gain since the second quarter of 2004.

Adjusted for inflation, hourly pay increased 0.6 percent in the year ended in March. That is one reason economists are forecasting consumer spending, which accounts for more than two- thirds of the economy, will slow in coming months.

Productivity at non-financial corporations, a measure watched by former Fed Chairman Alan Greenspan and other policy makers, increased at a 4.6 percent rate in the first quarter, almost twice as much as in the previous three months.

In the late 1990s, Greenspan was one of the first to recognize that the increased use of computers and the Internet were helping to boost productivity, and that the improvement could help contain inflation even as the economy strengthened and unemployment remained low. The realization allowed the Fed to keep interest rates little changed from 1996 to 1999.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net.

Last Updated: June 4, 2008 09:49 EDT