Productivity for 1st Quarter Beats ’87 Rate : But Buying Power Lags for 5th Period in a Row

The nation’s efficiency in churning out goods and services improved more than four times more rapidly during the first quarter of 1988 than it did in 1987, the government said Monday.

But average annualized hourly wage gains of only 3.4% failed to put most workers ahead of inflation for the fifth quarter in a row, the Labor Department said.

Not since the spiraling inflation of 1979-81 have workers gone that long without an improvement in their standard of living through wage gains, according to the Bureau of Labor Statistics.

Productivity--the biggest single indicator of U.S. competitiveness--increased among the nation’s non-farm businesses at an annual rate of 3.6% during January through March, the Labor Department said in revised statistics for the quarter.

‘Impressive Result’

Preliminary figures last month had put the improvement at only 0.9%, or roughly equal to the 0.8% gain for all of 1987. But those earlier figures were issued before the gross national product--the broadest measure of economic growth--was revised upward from 2.3% to 3.9% annually for the quarter.

Output of goods and services among non-farm businesses, which are responsible for three-fourths of the nation’s economic activity, grew at a much healthier 5.9%, the Labor Department said, more than double the earlier growth estimate of 2.7%.

To achieve the higher output, businesses increased their total employee hours by only 2.2%, up from an earlier estimate of 1.7%.

“It’s quite an impressive result but probably near the last of the good news we’re going to get on productivity,” said Allen Sinai, chief economist for the Boston Co., a New York economic consulting firm. “From here on it gets tougher as we approach full employment and the last workers hired are the least productive.”

The 3.4% average annual wage gain for the quarter sent the labor costs associated with each good or service down by 0.2%, compared to a 2% increase in labor costs in 1987.

However, non-labor costs--profit, rent, capital and indirect taxes--associated with each unit of output rose 1.1%.

After taking into account inflation as measured by the consumer price index, workers saw no increase in their buying power through their pay raises, the government said.

Not since the last quarter of 1986, when inflation for the year was only 2%, have workers seen an increase in their real wages. In 1987, their buying power actually declined by almost 1%.

Only twice since World War II--once in 1979-80 and again in 1980-81--have workers gone 15 months without an increase in their standard of living, the Labor Department said.

Factory workers fared better. Hourly wages in manufacturing industries rose at an annual rate of 4.6% in the first quarter, the biggest increase since a 5.1% annualized boost the last quarter of 1985.