Productivity Rise Is Fastest in Two Years
By VIKAS BAJAJ
Productivity rose at its fastest pace in two years in the third quarter, far more quickly than earlier predicted, as output rose and labor costs fell, the government reported today.
As a measure of how much the economy produced per hour of work, productivity rose by 4.7 percent in the non-farm business sector of the economy from July to September, compared with an earlier reading of 4.1 percent, the Labor Department reported. Real hourly compensation, which adjusts wages and other benefits for inflation, fell 1.4 percent, unchanged from previous estimates.
The report indicates that the productivity boom of the last several years may have more steam left in it than Alan Greenspan, the Federal Reserve chairman, and other economists had believed. Typically, productivity tends to slow in the latter parts of an economic expansion because businesses have wrung out most of the efficiencies from their operations and have to compete more aggressively for a thinning supply of employees.
For workers, however, the data shows that the rise in energy costs wiped away any advantage they received in the form of higher wages, at least for a time. Before adjusting for inflation, hourly compensation rose 3.7 percent.
Unit labor costs, which gauge how much compensation it takes to produce one unit of output, fell 1 percent in the quarter, twice as much as previously expected.
From 2000 to 2004, productivity gains averaged 3.28 percent a year, far higher than the average of 2.14 percent for the last 45 years. Those gains are one of the mains reasons cited by Mr. Greenspan and other policy makers for the ability of the United States economy to achieve long periods of growth in recent years without sparking inflation.
Compared with the same period a year ago, productivity in the third quarter grew at a rate of 3.1 percent, real hourly compensation rose 1.2 percent and unit labor costs were up 1.8 percent, much closer to the recent trend.
Some economists noted that the report allays concerns about broader inflation outside of the recent spike in energy prices, which in the case of gasoline prices have already fallen back down.
"This is great news on the inflation front," David Greenlaw, an economist at Morgan Stanley, wrote in a research note. "It will be very difficult for the economy to generate any sustained rise in core inflation with unit labor costs showing such a high degree of restraint." |
