"Productivity Rises 4.0 Percent"
[To the extent that productivity is rising, and unit labor costs, commodity costs, and final prices are almost flat, profit margins must be expanding. -- porc]
By The Associated Press -- May 11, 1999
WASHINGTON (AP) -- The nation's
productivity, a key gauge of future prosperity,
shot up at an annual rate of 4 percent in the
first three months of this year.
The Labor Department said today that the gain
in productivity, the amount of output per hour
of work, in the first three months of this year
followed a solid 4.6 percent increase in the
fourth quarter of 1998.
The first-quarter increase was even better than
the 3 percent advance many economists had
been expecting and indicated a spurt of
improved performance in productivity that was
first noticed two years ago is continuing.
Productivity is considered the key to rising
standards of living. If American workers
produce more per hour of work, their
employers can afford to pay them more
without having to raise the price of the
products they sell.
Because wages are rising but overall product
prices are not, inflation does not become a
problem and the increased wages that workers
receive go even further, meaning their
standards of living rise.
Through the 1950s and 1960s, American
productivity recorded impressive annual gains
averaging 3 percent a year, allowing American
workers to enjoy healthy rising gains in living
standards. But since 1973, productivity
increases have been at anemic annual rate of 1
percent.
Last year, productivity climbed by 2.2 percent,
close to a 2.4 percent jump in productivity seen
in 1996. In 1997, productivity had risen a more
lackluster 1.2 percent.
The gains in 1996 and 1998 have sparked
debates among economists over whether those
increases marked a fundamental shift to higher
rates of productivity. Some doubters argued
that the increases were simply a reflection of
the long economic expansion and not an
indication of a fundamental improvement.
But last week in a major policy speech, Federal
Reserve Chairman Alan Greenspan said the
economy's ''truly phenomenal'' performance in
recent years was due in large part to strong
gains in productivity.
Greenspan said large investments being made
in computers and other high-tech products of
the information age had fundamentally
improved productivity and allowed the
economy to grow as rapidly as it has in recent
years without fostering inflation.
But Greenspan also warned that the gains in
productivity cannot keep inflation at bay
forever. He warned that the nation's longest
peacetime expansion will be threatened at some
point down the road by the tight labor markets,
comments that have increased worries in
financial markets that the Fed later this year
will start raising interest rates to slow growth.
For the first three months of this year, the 4
percent rate of increase in productivity for
nonfarm workers reflected a 5 percent rise in
output and a 0.9 percent increase in the
number of hours worked.
Unit labor costs, a closely watched gauge of
inflationary pressures, rose at an annual rate of
only 0.3 percent in the first three months of the
year, the second consecutive quarter of low
inflation pressures. In the final three months of
last year, unit labor costs had actually fallen at
a 0.4 percent annual rate. |
