Increase in Worker Output Is Smallest Since 1982

The productivity of American workers increased at a modest 0.9% last year, the smallest gain since 1982, the government said today.

For the October-through-December quarter, non-farm productivity rose a barely perceptible 0.2%, the Labor Department said. Productivity rose 2.0% overall in 1988.

Increased productivity, or getting each worker to produce more for each hour he or she works, is crucial to economic growth without inflation, especially given the current squeeze in the labor market. It is also considered a key to America’s competitiveness with other economic powers.

Output in the non-farm sector was up 3.3% and average hours worked climbed 2.4%, again the smallest gains posted in those areas since 1982, the department’s Bureau of Labor Statistics reported.

Manufacturers reported a 2.8% productivity gain in 1989, close to the 2.7% gain of 1988. Manufacturing output rose 3.7% last year, down from the 6.1% increase of 1988.

Meanwhile, unit labor costs, a key determinant of future price inflation, shot up 6.7% for the quarter and 4.6% for the year. Those costs, which reflect changes in hourly compensation as well as changes in productivity, rose by 2.7% in 1988.

Hourly compensation in the non-farm sector jumped 5.5% in 1989, but rose only 0.6% when inflation was taken into account.