U.S. Productivity Rose at 2.4% Rate in 1Q Revision(negative spin at bottom of page)
By Siobhan Hughes
Washington, June 6 (Bloomberg) -- U.S. worker productivity grew at the fastest
pace in seven years during the first quarter when compared with the same period
last year, revised government figures showed today.
Non-farm productivity, a measure of output per hour worked, was 3.7 percent
higher than in the same three months of last year, the Labor Department said.
That matched the fourth-quarter pace and was the largest since a 4.2 percent
gain in the final quarter of 1992.
Compared with last year's fourth quarter, productivity increased at a 2.4 %
annual rate in the first three months of the year, the same as previously
estimated. That follows a 6.9 percent rise in the fourth quarter. Analysts
expected first- quarter productivity to stay at 2.4 percent.
``What productivity has enabled the economy to do is to grow as rapidly as we
have seen without generating a lot of wage pressures,'' said Kim Rupert, senior
economist at Standard & Poor's MMS in Belmont, California, before the report.
The economy grew at a 5.4 percent annual rate in the first three months of this
year. That marked the third quarter in a row in which the economy has grown
faster than 5 percent.
Unit labor costs -- a separate index measuring changes in worker compensation
and productivity -- rose 0.6 percent when compared with last year's first quarter.
That matched the fourth- quarter's year-over-year pace and was the smallest
since a 0.5 percent gain in the third quarter of 1996.
When compared with the fourth quarter, labor costs increased 1.6 percent.
Analysts expected labor costs to hold at a previously reported 1.8 percent rate.
Federal Reserve
Federal Reserve policy-makers watch productivity numbers for signs increased
compensation isn't causing inflation to accelerate.
While rising productivity has helped keep a lid on inflation, economic growth has
been rising even more and raising concerns inflation will accelerate.
``There are still physical constraints on how much the economy can produce,
and if either the labor supply or productivity falls, or if other bottlenecks develop,
we will reach those constraints sooner rather than later,'' said Atlanta Fed Bank
President Jack Guynn during a speech yesterday in Atlanta.
Fed policy-makers have raised the overnight bank lending rate six times in the
past year to 6.5 percent -- the highest in nine years -- in order to slow growth and
keep inflation from accelerating. Those rate increases may be starting to work,
recent economic reports suggest.
Statistics released last week showed sales of new homes fell in April to the
lowest level in four months, while orders placed with U.S. factories registered the
biggest decline in four months and retail sales dropped for the first time since
1998.
What's more, the nation's unemployment rate rose in May to 4.1 percent and the
number of non-government jobs fell for the first time in more than four years.
Analysts surveyed by Bloomberg News said the Fed will probably decide against
raising interest rates at the June 27-28 policy meeting.
``Stronger productivity would help make the case for not raising rates,'' said Chris
Low, chief economist at First Tennessee Capital Markets in New York, before the
report.
Report Details
Today's report also showed hourly wages adjusted for inflation rose at an 0.2
percent annual rate in the first quarter, previously reported as increasing at 0.3
percent.
The implicit price deflator -- a measure of inflation tied to the productivity report --
increased at a 2.4 percent rate in the first quarter, previously reported as rising at
a 2.3 percent rate.
Total worker output grew at a 6.1 percent rate in the first quarter, previously
report as rising 6 percent. The number of hours worked rose at a 3.6 percent
rate, the same as previously reported.
In manufacturing, productivity rose at a 7.3 percent annual rate, previously
reported at 6.9 percent.
Productivity at non-financial corporations, a statistic watched closely by Fed
Chairman Alan Greenspan, rose at an 3.6 percent annual rate in the first quarter,
compared with 5.1 percent in the final three months of last year.
Compared with the same period a year ago, first-quarter productivity at
non-financial firms rose 4 percent after a 4.2 percent year-over-year pace in the
fourth quarter.
Technology's Influence
After languishing at about a 1.8 percent in the 1970s and 1980s, productivity
growth in all U.S. businesses has been above 2.5 percent the past three years.
Business investment in computers and other technology has opened up new
avenues for boosting productivity.
At United Parcel Service Inc., for example, workers use mini- computers to track
deliveries, which saves 20 minutes of their time every day. While that one-third of
an hour may not seem like much, it adds up in a company with more than
60,000 drivers making deliveries each day.
Railroad carriers such as CSX Corp. and Norfolk Southern Corp., investments in
software to track yard inventory or car- repair billing can help these companies
not only ``do more,'' but also ``do it with fewer people,'' according to a report
posted on the Atlanta Fed Bank's Internet site.
The government measures productivity by adding all the hours businesses report
their employees worked, and then dividing by the gross domestic product of
private businesses.
-
With a negative spin - from USATODAY:
Productivity slows in first quarter
WASHINGTON - Americans' productivity, a key to future prosperity, slowed
to an annual growth rate of 2.4% in the first three months of the year, the
government reported today. The slowdown in productivity for all workers
outside of farming was accompanied by , a 1.6% acceleration in unit labor
costs in the first quarter, the Labor Department said. Unit labor costs are a
key barometer of underlying inflation pressures. The January-to-March gain in
productivity - the amount of output per hour of work - followed a much
sharper 6.9% increase in the final three months of last year. The 2.4% gain
was the same as the government first estimated one month ago and it was the
slowest quarterly performance since the second quarter of 1999. Still,
productivity growth has doubled in the past four years compared to the
previous two decades, a gain most economists attributed to heavy investment
by businesses in computers and other productivity-enhancing equipment. And
compared to the same quarter a year ago, productivity has increased at a solid
3.7% rate. Economists consider healthy productivity gains the key to
economic vitality and rising living standards. |
