Productivity in Non-Farm Sector Up 1%

Non-farm productivity rose at an annual rate of 1% in the second quarter of 1985, the Labor Department reported Tuesday, with strong gains in the manufacturing sector due to competitive pressure from imports.

The second-quarter increase in productivity represented an upward revision from the 0.5% preliminary figure issued last month.

Meanwhile, there was good news on the inflation front because unit labor costs moderated, according to the department’s Bureau of Labor Statistics, which was issuing final figures revised from preliminary data released a month ago.

Growth Holding Up

The second-quarter performance indicates that productivity growth is holding up in the face of the slowdown in the economy, said Allen Sinai, chief economist at Shearson Lehman Bros.

Manufacturing productivity rose at an annual rate of 7.5%, due to intense competitive pressure on U.S. industry from imports. Unit labor costs in manufacturing fell 2.5%, and in non-farm business they rose 2.3% from April to June.

“The basic message is that unit labor costs, which are the key determinant of inflation at this stage of the business cycle, indicate inflation will stay agreeably low,” Sinai said.

He added that traditionally, in the third year of recovery after a recession, there are labor shortages that show up in substantial wage increases and less productivity growth.

But intense competition from abroad and the slackening economy have forced “American business to pressure labor very hard.”

The figures were an improvement from first-quarter performance, when productivity declined 3.1% and unit labor costs rose 8.4%, raising some fears about the possibility of renewed inflation.