Worker Output Gains in ‘97, Labor Dept. Says
American business productivity grew briskly in 1997, fueling optimism about the economy’s ability to sustain strong growth without inflation, the Labor Department said Tuesday.
The 1.7% advance in output per hour of work at nonfarm businesses, on top of a 1.9% increase in 1996, explains why Americans are able to have their economic cake and eat it too, enjoying fast growth with declining inflation.
The new numbers came as the Clinton administration said Tuesday in its annual economic report to Congress that the U.S. is well-equipped to weather the aftermath of Asian financial storms.
The economy’s growth in 1997 at 3.9% was the strongest in nine years, the unemployment rate at 4.9% is the lowest in 24 years, and inflation at 1.7% is the best in 11 years.
The White House suggested that Asia’s turmoil may have a silver lining by slowing the United States’ recent rapid growth and thereby reducing the chances that U.S. interest rates may rise.
“As 1998 begins, we find that the prospects for continued growth with high employment and low inflation are excellent,” said Janet Yellen, who chairs the White House Council of Economic Advisors that wrote the report for President Clinton.
“Economic turmoil in East Asia, assuming that stability is ultimately restored there, may work to permit continued U.S. growth and job creation but with a more moderate outlook for interest rates,” she said.
In its report, the administration cited the healthy productivity of the last year as evidence there’s little danger of slipping into recession, even though the current expansion--just a month short of seven years--is the third longest in U.S. history.
In the fourth quarter, productivity grew at a 2% annual rate. That’s much better than predicted by economists, but slower than the 3.6% rate in the third quarter, the best in nearly five years.
Productivity is the key measure of how quickly living standards can rise. If the same number of workers at a company can produce more without working longer hours, that means the company can pay them more without raising its prices or trimming its profit.
