Q1 U.S. non-farm productivity growth pegged at 3.5% -
Thursday, May 6, 2004 3:50:01 PM
WASHINGTON (AFX) -- Productivity in the U.S. non-farm business sector rose at a 3.5 percent annual rate in the first quarter, the Labor Department estimated Thursday
The gain was in line with the consensus of Wall Street economists
Productivity rose a revised 2.5 percent in the fourth quarter, down from the 2.6 percent rate estimated two months ago
Defined as output per hour worked, productivity increased 5.4 percent in the past year
"The increase was strong by historical standards," said Mike Moran, chief economist at Daiwa Securities America
He noted that productivity growth averaged 2 to 3 percent during the late 1990s
Output in the nation's non-farm business sector rose 4.9 percent, while hours worked increased 1.3 percent and unit labor costs rose 0.5 percent. Real hourly compensation increased 0.4 percent, the Labor Department data showed. While firms have been holding the line on wages, benefit costs have been increasing sharply, Moran said
The rise in unit labor costs was above the recent average, but unit labor cost growth remained negative over the past year, falling by 1.3 percent, he noted
Worrisome trend However, some economists said the rise in unit labor costs was cause for concern
"Productivity is no longer strong enough to offset rising labor costs and it means that there is nothing left over to combat rising commodity prices or energy costs," said Robert Brusca, chief economist at Fact and Opinion Economics
In the manufacturing sector, productivity increased at a 3.1 percent annual rate. Manufacturing unit labor costs were up 2.0 percent, with output up 5.8 percent and hours worked up 2.7 percent. Real hourly compensation rose at a 1.5 percent rate
Productivity increased 5.3 percent in the past year in the manufacturing sector
Slowdown seen Moran said productivity is likely slow in the next year or two because it has a strong cyclical component
"Now that the expansion is becoming established, the cyclical component will fade and growth will gravitate toward its underlying trend -- which is probably in a range of 2.5 to 3.5 percent," he said
In a separate report out Thursday, the Labor Department said the number of new claims for state unemployment benefits fell to their lowest level since October 2000. This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com
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