3rd-Quarter Productivity Inches Up 0.2%
The productivity of the American workplace barely improved over the summer, the government said Thursday in a report that contained hints of mounting inflation pressures.
The Labor Department reported that nonfarm productivity--output per number of hours--inched up just 0.2% at a seasonally adjusted annual rate from July through September.
The growth, short of the 0.5% increase during the April-June quarter, was the slowest since productivity actually fell 1.1% in the final three months of 1995.
Many analysts had expected the third-quarter performance to be even worse--a decline of about 0.2%.
The stock market largely ignored the economic data Thursday and extended a postelection rally into record territory for a second-straight session, as interest rates fell toward an eight-month low in bond trading.
Productivity is a key to Americans’ standard of living. Its poor performance has been blamed for stagnant personal incomes for more than two decades.
Greater efficiency means businesses can increase wages without raising prices because workers are producing more with the same amount of work. If not matched by productivity gains, labor costs could be passed on to consumers.
Indeed, the report showed that unit labor costs--typically two-thirds of a product’s price--shot up at a 3.7% rate. Costs had risen 3.3% in the second quarter and just 1.5% in the first.
Meanwhile, several of the nation’s biggest retailers on Thursday reported healthy sales gains for October, boosting optimism about the prospects for a good holiday season.
Retailers had reported dismal sales during last year’s Christmas shopping season, when many businesses earn 50% or more of their annual profits.
Still, there were signs that consumer spending would not rebound to the lofty levels of the first half of the year.
The Federal Reserve Board reported Thursday that consumer credit fell 2.7% in September, the first decline in more than three years. Debt decreased by $2.6 billion, to $1.17 trillion, after advancing 5.2% a month earlier.
It was the first drop since consumer credit slipped 0.3%, or $200 million, in May 1993. Consumer credit includes all household debt not secured by real estate.
Both auto loans and the category that includes loans for mobile homes, education, boats, trailers and vacations shared in the loss. Revolving credit, which includes credit cards, posted the only gain.
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Productivity
Percentage change from previous quarter at annual rate, seasonally adjusted:
Third quarter 1996: 0.2%
Source: Labor Department
