Productivity Rebounds in 1st Quarter

Productivity of U.S. non-farm businesses rebounded at a 1% annual rate from January through March, more than erasing a 0.7% decline the previous quarter despite the ongoing recession, the Labor Department reported Monday, providing evidence that U.S. businesses were adjusting to the recession.

The Labor Department had at first incorrectly reported that productivity fell in the first quarter of 1991. But the department issued the correct number later in the day.

The agency said overall productivity of American businesses, including agriculture, was up 0.7% in the first three months of the year.

Economists said the first-quarter increase in productivity was expected as businesses cut costs by laying off workers to cope with the recession and declining sales.

“This is indicative of people being laid off,” said Kathryn Kobe, an economist with Joel Popkin & Co. “The few ones who are left are working harder to produce more output.”

But manufacturing productivity--which excludes the huge service sector--fell at a 0.9% annual rate, after dropping 1.3% in the fourth quarter, an indication that more layoffs may be ahead.

Some companies hesitate to lay off workers until it is clear sales are declining, Kobe said. In those situations, sharp drops in productivity can be expected as more workers produce fewer goods, she added.