Productivity Declines 1% in 1st Quarter

The productivity of American business fell an unexpectedly sharp 1% in the first quarter of 1990, despite the biggest gains in the manufacturing sector in nearly three years, the Labor Department said Monday.

The decline in non-farm productivity, a measure of efficiency and competitiveness of U.S. businesses, compared to a revised 0.5% advance in the 1989 fourth quarter.

The slump was the largest since a 1.3% decline in the 1989 first quarter. The first three months of the year are often sluggish after the holiday season.

Economists were expecting a modest gain in productivity, which gauges the output per hour of all workers.

The figure is considered of long-term importance for the nation to reduce its trade deficit, because American firms must produce more at lower costs to boost efficiency and lower prices.

“It is negative for the trade deficit because productivity weakness means we lose out in competitive terms internationally,” said Michael Englund, economist at MMS International Inc.

Manufacturing productivity, frequently stronger than overall results, rose a brisk 4.1%, exceeding its 3.1% fourth-quarter gain.

PRODUCTIVITY

Non-farm business productivity, percent change from previous quarter, seasonally adjusted annual rate.

First quarter 1990: -1.0%