Productivity Growth Slows But Is Stronger Than Expected
A WSJ.COM News Roundup
WASHINGTON -- Productivity slowed to a 2.4% rate of growth in the last three months of 2000.
Separately, the pace of consumer borrowing decelerated sharply in December.
The growth in nonfarm business productivity -- the amount of output per hour of work -- was still a healthy gain and much better than economists expected. Economists surveyed by Thomson Global Markets estimated fourth-quarter productivity would grow by only 1.5%. However, the 2.4% rise was the slowest since a 2.1% rate in the first quarter of 2000.
"Clearly productivity is holding up even as the rest of the economy is slowing down," said National Association of Manufacturers President Jerry Jasinowski.
Productivity in the third quarter was revised down to show a 3% jump from a previously reported 3.8% increase.
However, despite the sharp slowdown in the final quarter of 2000, productivity for all of last year posted the best gain since 1983, capping a remarkable five-year stretch of growth in this important indicator of rising living standards.
Gains in productivity are the key to rising living standards because they allow wages to increase without triggering higher inflation that would offset those higher wages.
For all of 2000, productivity rose by a strong 4.3%, the best showing since a 4.5% gain in 1983. Last year's performance was a big improvement over 1999's 2.6% growth in productivity.
On a year-to-year basis, productivity increased at a rate of 3.4%, in the fourth quarter.
Unit labor costs, a key gauge of inflation pressures, rose at a rate of 4.1%, up from a 3.2% rate in the previous quarter. The rise in fourth-quarter labor costs was the biggest since a 4.3% rate of increase in the second quarter of 1999. Economists had expected labor costs would increase at only a 3.5% rate.
For all of 2000, unit labor costs went up by just 0.7%, down from 1999's 1.8% gain, suggesting inflation pressures were contained. Last year's rise was the smallest since 1996, when labor costs rose 0.5%.
"We did see a further pickup in wages and benefit pressures, including costs of health care, as the year came to close, but the impact on inflation has been minimal at this point because companies lack the general ability to raise prices to cover rising labor costs," said Lynn Reaser, chief economist at Banc of America Capital Management. She said the increase did pose a threat to companies' profit margins.
Hourly compensation rose 3.8% after adjusting for inflation, after rising 3.1% in the third quarter. Hours worked declined 1.1% in the fourth quarter, after a 0.7% drop during the previous three months.
Wages have grown only modestly in recent months, although the unemployment rate has hovered around near a 30-year low at 4.1%. The Labor Department's latest employment report showed no increase in average hourly earnings.
Economists believe productivity will continue to grow in the coming quarters but at a lower rate than last year, given the economic slowdown and businesses' reduced investment in high-tech equipment.
Wednesday's numbers reflect preliminary data and will be revised on March 6.
Consumer Borrowing Decelerates
The Federal Reserve said consumer credit outstanding rose $3 billion in December, or at an annual rate of 2.4%. That's down from the revised $13.9 billion advance, or 11.1% pace, seen in November. The previous month had initially been reported as a $12.9 billion increase.
Economists surveyed by Thomson Global Markets expected credit to rise $7.5 billion in December.
The December advance was the smallest monthly gain since September 1999, the Fed said. |
