Growth in Worker Output Fastest Since ’86 : Economy: Government also says the cost of labor declined during the fourth quarter at the steepest rate in a decade.

The productivity of American workers was improving at the fastest rate in seven years as 1993 came to a close, while the cost of their labor was falling at the steepest pace in 10 years.

Analysts acknowledged the improvement was coming at the expense of jobs, but contended it will mean greater employment later. And, they added, the lack of inflation means greater buying power now.

“There’s unmistakable pain for workers who are not getting employed now,” said economist Stephen S. Roach of Morgan Stanley & Co. in New York. “But as companies become more competitive, they will be the big job creators for the U.S. economy.”

The Labor Department said non-farm productivity--output per number of hours worked--shot up a revised 6.1% at a seasonally adjusted annual rate from October through December.

It was the best improvement since a 6.9% advance in the first three months of 1986. Fourth-quarter productivity originally was reported rising at a 4.2% rate.

Increased productivity helps keep prices under control and thus is essential for improved living standards and to make American products more competitive overseas.

Unit labor costs shrank at a 3.1% annual rate in the fourth quarter, the largest decline since a 4.8% drop in the second quarter of 1983.

With job creation so slow, workers generally are unable to bid up their wages and benefits. And since labor typically represents about two-thirds of the cost of a product, the report suggested little inflationary pressure.

Despite a 4% productivity gain in the third quarter, productivity for all of 1993 increased just 1.7%. That was revised up from 1.6% in the government’s initial estimate but still was little more than half of the 3.1% advance in 1992.

Productivity was held back last year by annualized declines of 1.8% in the first quarter and 0.4% in the second, when the overall economy slowed from its robust pace in the final three months of 1992.

Still, it was the fourth straight increase, including advances of 1.1% in 1991 and 0.4% in 1990. Productivity had slipped 0.9% in 1989, the first decline since a similar 0.9% drop in 1980.

Roach said productivity growth was continuing--although he doubted the fourth-quarter pace could be sustained--and suggests “we have a uniquely powerful productivity-led recovery.”

Unit labor costs had dropped at a 0.4% rate in the third quarter and the fourth-quarter decline marked the first back-to-back decrease since the last half of 1962.

For the year, costs edged up a revised 1.8%, compared to 1.9% in the department’s initial report and down from 2.0% in 1992.

Output in 1993 increased 3.8%, up from a 2.7% gain in 1992. It advanced at an 8.6% rate from October through December and the biggest gain since a 10.3% jump in the first quarter of 1984. Output had risen 4.1% from July through September.

At the same time, total hours worked last year rose 2.1%, compared to a 0.4% decline a year earlier. In the final three months, hours worked were up at a 2.3% rate, compared to a 0.1% advance in the previous quarter.

Manufacturing productivity shot up 5.1% in 1993, up from a 4.3% advance in 1992. That included a 7.5% jump at factories making long-lasting goods such as cars and computers.

Productivity

Non-farm business productivity, percent change from previous period. Quarterly figures are at a seasonally adjusted annual rate.

4th quarter, 1993: 6.1% 1993 (annual): 1.7%

Source: U.S. Department of Labor