Productivity Stronger Than Expected
Updated 9:14 AM ET March 7, 2002
WASHINGTON (Reuters) - The productivity of U.S. workers rocketed past expectations in the final three months of last year to post the biggest increase since the second quarter of 2000, the government said on Thursday.
The Labor Department, said productivity, or worker output of goods and services per hour outside the farm sector, rose at a 5.2 percent annual rate in the fourth quarter, revised upward from an initial estimate of 3.5 percent. The increase surpassed analysts' expectations for a 4.5 percent rise.
``It was expected but stunning,'' said Jim Glassman, senior economist at JP Morgan. ``I think it's a reminder that underlying productivity gains have accelerated.''
The Federal Reserve, led by Alan Greenspan, watches productivity closely since it is credited with allowing the U.S. economy to log swift growth in the late 1990s without fanning excessive price pressures.
With the economy in recession since last March, businesses continued to cut back on the numbers of hours worked. The number of hours spent on the job fell 3.8 percent, the largest decline since the first quarter of 1991 when the economy was last in recession and when hours worked fell 4.8 percent.
Unit labor costs, a closely watched gauge of wage pressures, fell 2.7 percent during the fourth quarter, the steepest decline since a drop of 2.9 percent in the final quarter of 1999 and more than the 2.1 percent fall analysts were expecting.
For the full year, nonfarm productivity advanced just 1.9 percent, the weakest annual performance since a 0.9 percent rise in 1995. Unit labor costs for the year rose 3.8 percent, the biggest annual rise since a 4.3 percent gain in 1990.
Usually, productivity declines during an economic downturn as output usually falls faster than hours worked. But it has held up remarkably well during the latest recession.
``It's a reminder that the growth potential for the United States is much higher than it used to be,'' said Glassman. ``It's the reason why the Fed is so relaxed.''
The Fed is next due to meet to discuss interest rates on March 19. A poll by Reuters at the end of last month showed Wall Street is expecting rates to be left unchanged. |
