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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1438)	3/9/1999 11:25:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

4th-Quarter Productivity Is Strong By The Associated Press WASHINGTON (AP) -- The productivity of American workers surged at the fastest pace in six years at the end of 1998. Healthy gains in productivity throughout the year gave Americans their biggest after-inflation pay increase in 12 years. Productivity -- the output per hour of work of nonfarm, non-supervisory workers -- raced ahead at a 4.6 percent annual rate during the final three months of last year, driven by computers and other high-tech innovations. That was the best rate since the fourth quarter of 1992 and even better than the 3.7 percent estimated a month ago, the Labor Department said Tuesday. For the year, productivity grew by 2.2 percent, up significantly from 1.2 percent in 1997. Analysts debate how much of the pickup is a temporary reflection of the stronger economic growth of recent years, and how much an underlying cause of the improved, inflation-free growth. Whichever, it's good news. ''Productivity gains really determine the standard of living in a country,'' said economist Sung Won Sohn of Wells Fargo Co. ''We can go all the way back to the 1800s and show a very close correlation between America's standard of living, as measured by inflation-adjusted wage gains, and productivity.'' Sizable gains mean companies can pay their workers more while still holding the line on prices and delivering increased profits to shareholders. Last year, for instance, inflation-adjusted hourly wages and benefits jumped 2.6 percent. That's more than double the 1.2 percent increase in 1997 and the largest since 1986. At the same time, the growth in unit labor costs, a key barometer of underlying inflation pressures, slowed. Those costs rose 1.9 percent, compared with 2.3 percent in 1997. ''Employees are now reaping the benefits of the surging economy,'' said economist Mark Zandi of Regional Financial Associates in West Chester, Pa. ''Both continued productivity gains and the exceedingly tight labor market are allowing employees to garner a bigger share of the increasing economic pie.'' The U.S. economy once enjoyed stellar productivity growth, at a nearly 3 percent rate in the 1960s and early 1970s. But it slowed to an anemic 1 percent rate from 1974 through 1995. Since then, it's averaged about 2 percent a year, leading some economists to speculate that the economy has embarked on a new era of productivity growth as businesses become increasingly skilled at making new technology pay off. ''A remarkable element of our recent prosperity has been the rapid acceleration in the application of computer and telecommunications technologies, which have engendered a significant increase in productivity,'' Federal Reserve Chairman Alan Greenspan said in a speech Tuesday. It's difficult to pin down, but some calculations suggest the rate of return on new equipment investments in recent years ''has moved up markedly,'' he said. Analysts also believe last year's solid productivity growth bodes well for the economy's ability this year to extend the longest peacetime expansion in U.S. history while keeping inflation contained, without an interest rate increase by the Federal Reserve. ''Alan Greenspan seems ... inclined ... to believe that something structurally important is going on in productivity, and it makes him much less nervous about a resurgence of inflation,'' said economist David Orr of First Union Corp. Even at factories, many of them hard-hit by the loss of export sales to Asia and other struggling parts of the world, productivity increased a strong 4.2 percent in 1998, down from a five-year high of 4.9 percent in 1997. In the manufacturing of durable goods -- items from cars to computers expected to last three or more years -- productivity surged 6.8 percent, the biggest advance since 1971. The ability of manufacturers to maintain, and in many cases improve, productivity reflects their determination to operate efficiently in the face of lost sales abroad. That, in turn, has caused the loss of more than 337,000 jobs since March.