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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 (1636)	5/11/1999 10:55:00 AM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

"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.