Productivity, Inventory Figures Indicate Slowing

More signs of an economic slowdown emerged Tuesday as the government said worker productivity rose just 0.7% in the first quarter and wholesalers’ stocks of unsold goods grew for a ninth straight month in March.

The Labor Department said the rise in productivity outside the farm sector--a measure of worker output per hour--was the smallest in nine months. It follows a revised 4.0% jump in the fourth quarter of 1994, which initially was reported as a 1.7% gain.

The modest rise last quarter reflects a 3.3% rise in output--the smallest since the second quarter of 1994--and a 3.4% rise in unit labor costs, the most in two years.

“That’s exactly what you’d expect to see with a slowing in the economy,” said Richard Berner of Mellon Bank. Economists said productivity typically slackens as companies rein in output, which in turn pushes up labor costs associated with production.

Wholesale inventories rose 1.2% to a seasonally adjusted $243.2 billion in March, after a revised 0.9% gain in February, the Commerce Department said. Sales fell for the first time since last fall.

“We’re seeing a slowing in demand and a buildup in inventories,” Berner said. “That’s consistent with the notion that production will continue to be cut back so inventories can be realigned with sales.”

Stocks of both long-lasting durable goods, such as hardware products and metals, as well as non-durables, such as chemicals and petroleum, increased in March.

Sales by wholesalers fell 1.0% in March to a seasonally adjusted $183.1 billion, following a revised 1.2% increase in February. It was the first time that sales had fallen since a 0.6% drop in September. And it was the biggest fall for any month since June, 1993, when they dropped 1.6%.

Previously, the department said inventories had grown more sharply in February, by 1.2%, and that sales had risen by only 1.0%.

Economists said that despite the slowdown, the economy is still fundamentally healthy. “It’s not an economy going to pieces,” said William Griggs of Griggs & Santow Inc.

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Productivity

Non-farm business productivity, percentage change from previous quarter, seasonally adjusted annual rate: ‘95, 0.7%

Source: Labor Department