Productivity rises 5.1 percent

Dec. 4, 2002 at 9:03 AM
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WASHINGTON, Dec. 4 (UPI) -- The Labor Department on Wednesday reported that productivity of American workers rose at a revised 5.1-percent annual rate during the third quarter, faster than the 1.7-percent pace posted during the second quarter.

The government agency last month estimated productivity was growing at a 4-percent annual rate during the third quarter.

Economists on Wall Street were expecting the report to show productivity growing at a 5 percent pace.

Productivity measures the growth of labor efficiency in producing the economy's goods and services.

The latest report from the government agency showed unit labor costs, or the amount paid for each unit of production, fell at a 0.2-percent rate in the third quarter after rising at a 2.2-percent pace in the second quarter. Economists on Wall Street were expecting labor costs to remain unchanged during the quarter.

Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends.

Productivity growth is critical because it allows for higher wages and faster economic growth without inflationary consequences. This is a hot topic these days with the economy so strong, the labor market so tight, yet inflation so well-behaved.

Some Wall Street experts assert that dramatic productivity advances are allowing the economy to sustain a much faster pace of growth than previously thought possible.

Federal Reserve Board Chairman Alan Greenspan has expressed skepticism about those assertions, however. In either case, the productivity data gives investors important clues on how stocks and bonds can be expected to perform, and the market reactions to these releases show the true importance of productivity growth.

The report showed output increased at a 5.1-percent rate in the third quarter after rising at a 0.9-percent pace in the second quarter.

The government agency said hours worked were unchanged after falling at a 0.7 percent pace in the second quarter.

Productivity at non-financial corporations rose at a 5.7-percent annual rate after increasing at a revised 5.8-percent pace in the second quarter.

The Labor Department said productivity among manufacturers grew at a 5.5-percent rate after increasing at a 4.2-percent pace in the second quarter.

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