Worker Output Still on the Rise, Up 2.2% in 1994 : Economy: Efficiency held labor costs, a signpost of inflation, to a small increase.

WASHINGTON — Workplace productivity rose 2.2% last year, helping to hold labor costs--a key measure of inflation--to the smallest advance in three decades.

The Labor Department said Wednesday that non-farm productivity was boosted in part by a revised 1.7% increase at a seasonally adjusted annual rate in the October-December quarter. The initial estimate a month earlier was 1.8%.

Productivity--output in comparison to number of hours worked--is a key measure of the U.S. standard of living and business competitiveness: Increases mean companies are making their goods more efficiently, at lower costs.

The 1994 productivity rise followed a 1.5% gain in 1993. The last time productivity declined on an annual basis was in 1989, when it fell 0.9% as the economy was nearing recession.

The report said unit labor costs--typically two-thirds of the cost of a product--edged up 0.9% last year after rising 1.7% in 1993.

It was the smallest increase since a 0.8% gain in 1964.

The advance included a 1.7% annualized gain in the fourth quarter, up from a 0.1% decline in the previous three months.

Some analysts say labor costs remain low because the rate of unemployment makes many employed people afraid to demand higher pay or better benefits.

But the Commerce Department’s report suggests that workers were not fully sharing in the 2.2% productivity gain.

Hourly compensation, after adjustment for inflation, advanced just 0.5% in 1994, a slight increase over the 0.2% gain of 1993 but down from 2% in 1992, a year in which productivity rose 2.7%.

Output in 1994 increased 5.2% from 4.1% a year earlier. It was the biggest annual advance since an 8.2% jump in 1984, when the government began keeping output records.

It advanced at a 5.3% rate from October through December, compared to 4.3% from July through September.

Total hours worked last year rose 2.9%, faster than the 2.5% increase of 1993.

In the final three months, hours worked were up at a 3.5% rate, compared to a 1.1% advance in the previous quarter.

Manufacturing productivity shot up 4.9% after advancing 3.2% in 1993. That included a 5.9% jump at factories making long-lasting goods such as cars and computers.

Manufacturing represents about 20% of the U.S. business-sector employment.

In the fourth quarter, manufacturing productivity was rising at a 3.1% annual rate, down from 3.5% in the previous three months.

Total business productivity, including farming, increased 2.3%, after rising 1.5% in 1993. It rose at a 1.7% rate in the fourth quarter, slower than the 3.7% gain for July through September.

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U.S. Productivity Gains

Percentage change:

1994: 2.2%

Source: Labor Department