Productivity Gain Highest Since End of ’92

A key to economic prosperity that helps keep inflation in check took its biggest leap in seven years, rising at a 6.4% rate at the end of 1999. But the surge in American workers’ productivity didn’t change economists’ predictions of higher interest rates in the coming months.

Productivity--the amount of output for each hour of work--was even stronger than the government previously estimated for the fourth quarter and exceeded the stellar 5% annual rate of growth posted in the third quarter, the Labor Department said Tuesday.

Economists consider healthy productivity gains the key to economic vitality and rising living standards. Sizable gains mean companies can pay employees more, hold the line on prices and still deliver increased profits to shareholders. Computers, satellites and other technological advances are credited with helping to boost workers’ efficiency.

“Our economy remains in balance and workers are reaping the benefits of the sustained productivity growth,” said Labor Secretary Alexis M. Herman.

In another report, Americans rang up an unexpectedly large $17 billion in consumer debt in January, the largest monthly increase since November 1995, the Federal Reserve said.

With plentiful jobs and rising incomes, consumers are feeling wealthy and in the mood to spend, economists said.

The new fourth-quarter productivity figure--in line with many analysts’ expectations--was revised upward from a previous estimate of a 5% rate and marked the biggest leap in productivity growth since the end of 1992 when it rose at a 7.4% rate.

At the same time, unit labor costs, a key barometer of underlying inflation pressures, fell by a bigger-than-expected 2.5% rate in the fourth quarter, the steepest drop in seven years.

That means the costs of producing a particular piece of merchandise fell. It also suggests that companies are under less pressure to raise prices to cover these costs, economists said.