Non-Farm Productivity Worst Since ’82

Productivity in the manufacturing sector of the nation’s economy grew by 2.8% last year, but overall productivity in the non-farm sector improved by just 0.9% for the worst showing since 1982, the government said today.

The 0.9% increase in productivity--defined as output per hour of work--was less than half the 2% gain recorded in 1988, the Labor Department said.

In addition to signs of slumping productivity in the overall economy, the report showed that hourly labor costs--a major inflation measure for businesses--escalated significantly, jumping by 5.4%, up from 4.7% in 1988 and also the biggest increase since the 1981-82 recession.

Productivity for the October-December period grew at an annual rate of just 0.2%, contrasted with the 2.4% gain of the previous quarter.

Analysts have blamed part of last year’s poor productivity performance on an overall slowdown in economic growth.

“That’s what happens when you have a slowdown in the economy, you get squeezed from both ends. The two blades of the scissors--subdued productivity and higher labor costs--began to push together,” said Robert Dederick, chief economist for Northern Trust Co. of Chicago.

“There is no real evidence that productivity is going to escalate any time soon. We’re not likely to break out of this vise in 1990,” Dederick said.

Since the end of the 1981-82 recession, productivity growth has averaged 1.8% a year. While a slight improvement over the 1.2% average growth in the 1970s, it was still far below the 3.3% rate of increase posted in the two decades after World War II.

Increasing productivity is considered basic to boosting living standards because it allows businesses to pay workers more as their output rises without risking higher inflation.