Productivity Jumps 3% in 2nd Quarter : Economy: Hourly compensation, however, advances just 0.2%.

Productivity in the American workplace increased by a strong 3% annualized rate in the April-June quarter.

The Labor Department said Tuesday that seasonally adjusted non-farm productivity gains in the second quarter bested the revised 2.5% rate for the first three months, although it trailed the 4.3% gain for the fourth quarter of 1994.

“This is a very impressive performance for the quarter just ending,” said economist Stephen S. Roach of Morgan Stanley & Co. “It continues to reflect the broad-based restructuring and re-engineering in the manufacturing and service industries.”

Roach noted that productivity gains were limited to about 1% during the 1970s and ‘80s.

Productivity is defined as output per number of hours worked. It is a key measure of the nation’s living standard and business competitiveness: Increases mean companies are making their goods more efficiently and at lower costs.

But as workplace efficiency improved, workers themselves were not sharing fully in the gains.

Hourly compensation, when adjusted for inflation, advanced just 0.2%, much slower than the 1% gain three months earlier. It was the smallest increase since compensation fell 0.8% in the third quarter of 1994.

Unit labor costs, a measure of inflation because they typically represent two-thirds of the cost of a product, edged up just 0.6%, much less than the 1.6% gain for the January-March period.

It was the smallest increase since costs fell 0.4% from October through December.

Output rose 0.6% for the second quarter, down from a revised 4.5% for the first. The January-March output was previously estimated to have shot up 4.7%.

But total hours worked fell 2.4%, the largest drop since a 3.4% decline in the second quarter of 1980. Hours worked had risen 2% for the first quarter.

Manufacturing productivity slowed to a 2.1% gain in the second quarter after rising 3.5% in the first three months. Manufacturing represents about 20% of the U.S. business sector.

Productivity in durable goods inched up just 0.5%, compared to a 4.4% jump three months earlier. Economist Gordon Richards of the National Assn. of Manufacturers attributed the slower pace to a slump in demand for long-lasting products such as automobiles.

Productivity among non-durable goods manufacturers, on the other hand, shot up 4.5%, compared to a 2.1% gain in the first quarter.

“Manufacturing productivity should pick up rapidly by the fourth quarter, when the inventory correction will be over and exports should be adding to demand,” Richards said.

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Productivity

Percentage change from previous quarter, at annual rate, seasonally adjusted:

Second quarter 1995: 3.0%

Source: Labor Department