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Wednesday, Aug. 12, 1998
Productivity decreases for first time in three years
Economists say drop is probably temporary
By DAVE SKIDMORE
Associated PressWASHINGTON -- The productivity of American workers -- the crucial factor in whether living standards improve -- declined in the April-June quarter for the first time in three years.
Economists said the drop was probably an anomaly. Output growth slowed markedly as businesses sought to reduce an overhang of unsold goods. But, with labor scarce, employers were reluctant to let workers go.
Productivity -- output per hour of work -- for non-farm, non-supervisory workers fell at a 0.2 percent annual rate from the previous quarter, the Labor Department said Tuesday. The last decline came during the first three months of 1995.
But it rose at a very brisk 3.5 percent rate in the first quarter of this year. So, even with the second-quarter decline, productivity was up 2 percent from a year earlier.
``When you cut back production in the short run, you don't fire everybody. So, productivity goes down,'' said economist William Cheney of John Hancock in Boston. ``But I think this can be viewed as a totally temporary phenomenon.''
Once inventories decline, businesses will start producing more goods. Output also was depressed by the now-settled General Motors strikes and, more fundamentally, by the burgeoning trade deficit with Asia.
Even with Asian spillover problems, U.S. productivity should look better in the third and fourth quarters than it did in the second, economists said.
Economist Gordon Richards of the National Association of Manufacturers said he expects productivity to grow between 1.6 percent and 1.8 percent a year over the next five years.
That compares with 1.4 percent in 1997 and 2.4 percent in 1996, when productivity looked considerably better than the 1 percent average from 1974 through 1995, but not nearly as good as the 2.9 percent average during the 1960s and early 1970s.
Healthy productivity growth is important because it keeps inflation low and helps the stock market. That's because employers can increase workers' compensation and earn increased profits without raising product prices.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web