Productivity Rises a Modest 0.7% in 1986

The government released some gloomy economic figures Monday, with reports that business productivity rose less than 1% in 1986 and construction spending fell in December for the second month in a row.

The fourth quarter of 1986 saw the nation’s productivity falling at an annual rate of 1.7%, offsetting gains made in the first half of the year, the Labor Department said.

As a result, productivity--the efficiency of non-farm businesses in producing goods and services--rose only 0.7% for the year.

That was slightly better than the 0.5% rise in 1985 but well below the respective 1.8% and 3.3% increases in 1984 and 1983 when the nation was pulling out of the worst recession since the early 1930s.

Productivity is a measure of the nation’s competitiveness.

Manufacturers still showed the greatest results in attempting to improve their competitiveness in both U.S. and world markets, with slightly higher productivity in October, November and December.

However, the preliminary data reported Monday by the Bureau of Labor Statistics show that the rise in productivity the last three months of 1986 was a small fraction of the gains they had been making since 1980.

Productivity gains in the nation’s factories fell to a seasonally adjusted annual rate of 0.2% that last quarter, compared to a 3.6% improvement in the fall.

For the entire year, manufacturing productivity increased 2.7%, compared to a 4.4% increase in 1985, a 4.1% rise in 1984 and a 5.8% jump in 1983.

As the nation’s trade deficit climbed to a record $170 billion in 1986, manufacturing output for the year rose only 2.5%, compared to increases of 3.8% in 1985 and 10.8% in 1984.

The number of hours worked in American factories dropped again--0.2% in 1986 compared to a 0.5% decline in 1985--reflecting a loss of nearly 200,000 manufacturing jobs the past two years.

In its report on construction spending, the Commerce Department said widespread weakness in private construction offset a significant gain in government spending in December, leading to a 0.5% gain.

Building activity totaled $376 billion at a seasonally adjusted annual rate in December after a 1.7% decline during November.

Construction spending, one of the strongest segments of the economy in 1986, is expected to weaken considerably in 1987 due to widespread overbuilding and high vacancy rates for apartments and office structures and the adverse impacts of the new tax law, which eliminates a variety of real estate tax benefits.