‘90 Productivity in Biggest Fall Since ’82

The productivity of America’s non-farm workers fell 0.8% last year, the worst decline since 1982 and the first back-to-back reversal--coupled with the 1989 drop of 0.7%--in a decade, the government said Monday.

Labor costs continued to rise as the weak economy forced businesses to drastically trim work hours in the final months of 1990, the Labor Department report showed.

“What we have here is the worst of both possible worlds--the economy was sinking into recession at the same time labor costs were accelerating,” said David Jones, an economist with Aubrey G. Lanston & Co.

Increased productivity, or getting more worker output per hour on the job, is considered vital to increasing the nation’s standard of living without inflation.

But the latest report, said Jones, shows that the United States is continuing to lose its competitive edge in international markets and threatens a long-term reduction in living standards “unless one of two things happens--either we sharply improve the quality of our labor force through education, or sharply improve savings and investment in new plants and equipment.”

“Our ability to produce more goods and services does determine the pie that’s available to us,” said Allen Sinai, chief economist at Boston Co. “That pie grew very slowly in 1990 and is going to shrink in 1991.”

The report showed that during the final three months of 1990, the nation’s businesses trimmed the working hours of their employees at an annual rate of 2.7%--the largest falloff since the depths of the 1981-82 recession.

It was the second quarterly decline in the number of hours worked, a normal consequence of recession--as businesses trim payrolls.

While productivity fell for all of 1990, it was about unchanged for the fourth quarter, growing at a small annual rate of 0.1%.

In the manufacturing sector, productivity declined at an annual rate of 2.4% in the October-December period--the largest drop since 1981. Meanwhile, factories trimmed their hours by 6.4% at the tail end of 1990.

The decline in manufacturing hours was the steepest since the final quarter of 1982, when hours fell 8.6%, the government said.

For all of 1990, manufacturing productivity increased 3% and hours worked fell 2.1%, the report said.

Meanwhile, unit labor costs, a key gauge of future price inflation, rose 4.3%, well above the 3.9% increase of 1989. Hourly labor costs rose 3.5% for the year, also above the 3.2% increase of 1989.

However, workers actually saw their hourly compensation decrease in 1990, once inflation was taken into account.