U.S. Productivity Still on Uptrend
U.S. workers kept churning out goods and services more efficiently at the start of the year, stoking output at a faster pace than their paychecks grew and keeping a damper on inflation.
The Labor Department said Tuesday that the output per hour of workers outside the farm sector rose at an annual rate of 2.4% in the first quarter. Unit labor costs--the most important item in overall production costs--went up just 1.6%.
Although the January-to-March performance was down from an extraordinary fourth quarter, when productivity shot up at an annual rate of 6.9% and unit labor costs actually shrank 2.9%, it reflected a vigorous economy.
“It supports the notion that we have moved into a stage where we can expect to see continued productivity gains at a much faster rate than we did throughout the long dreary period from 1973 to 1995,” said Robert Dederick, economic consultant to Northern Trust Co. in Chicago.
The latest productivity report from the Labor Department was a revision of the data it issued a month ago, when it said that output had grown at the same 2.4% rate but that unit labor costs were up slightly more strongly by 1.8%.
Analysts said the report should be reassuring to Federal Reserve policymakers, who have sought to slow the economy’s growth rate by boosting interest rates six times in the past year, aiming to bottle up potentially inflationary wage and price rises that could threaten the 9-year-old expansion.
“It certainly suggests that the Fed doesn’t have to do an awful lot more to keep inflation in check,” Dederick said, nothing that the year-over-year performance painted an even more favorable picture of rising productivity and controlled costs.
Compared with a year ago, unit labor costs were up barely 0.6% in the first quarter, the same year-to-year growth as in the fourth quarter of last year.
By contrast, productivity soared at sizzling year-over-year rates of 3.7% in the first quarter and the 1999 fourth quarter.
A separate report from the Commerce Department underlined confident expectations for the economy, as wholesalers added to their stockpiles of goods for a 15th straight month in April.
The steady buildup implies that wholesalers expect consumer demand, the key driving force behind the long-running expansion, to remain buoyant.
The stock-to-sales ratio that gauges how long it would take to use up inventories at the current sales pace, remained at a slim 1.28 months’ worth in April, leaving ample room for factories to keep production rates up.
