Productivity Posts Best Gain in Three Years

The productivity of the American workplace posted its best showing in three years last year but was faltering as the year ended, the Labor Department reported Wednesday.

Many analysts believe productivity rebounded slightly in the quarter just ended, held back by winter weather and the effects of a strike at General Motors Corp. that rippled through related industries such as suppliers.

Robert G. Dederick, an economist consultant at Northern Trust Co. in Chicago, said big employment gains in February and March combined with continued sluggish output to keep productivity from growing faster.

“Given the impact of the weather and the GM strike, there likely were some temporary problems . . . in the first quarter,” he said.

Nonfarm productivity--output per number of hours worked--grew 1.1% during 1995, the largest gain since a 3.2% advance in 1992, the Labor Department said.

While that was well above the previous two years, growth was less than half the annual increases typical in the 1950s and 1960s. Productivity increased just 0.2% in 1993 and 0.5% in 1994.

Productivity is considered a key element of Americans’ standard of living, since increased efficiency means businesses can boost their workers’ pay without having to mark up their prices.

A lack of productivity gains could lead to stagnant wages.

Economists disagree about the cause of recent productivity gains. Some contend the improvement is the result of greater efficiency as businesses reduce and restructure their work forces and invest in high-tech equipment.

Others maintain that it’s merely the result of the economic recovery and that as the business cycle matures and levels off, productivity gains will slow.

Output rose 2.7% in 1995 after jumping 4% a year earlier, while hours worked were up 1.6% after a 3.4% advance.

But in the final three months of 1995, productivity slumped 1% as output dropped sharply to a 0.6% seasonally adjusted rate of growth from 4.7% in the July-September quarter. Hours worked rose at an annualized rate of 1.6%, down from 2.9% in the third quarter.

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Productivity

Annual changes in productivity since 1985. A negative number indicates productivity fell.

1995: 1.1%

Source: Labor Department