Worker Productivity Rises

Growth in American workers' productivity, the key to rising living standards, improved in the July-September period after nearly stalling during the previous quarter.

The productivity of nonfarm, nonsupervisory workers measured as output per hour of work rose at a seasonally adjusted 2.3 percent annual rate in the third quarter, the Labor Department said Tuesday.

During the April-June period, productivity advanced at a scant 0.3 percent rate, the slowest increase in nearly two years. Productivity was robust during the first three months of the year, rising at a 3.5 percent rate.

Economists consider productivity the key to prosperity. Sizable gains mean companies can pay workers more, hold the line on prices and still earn the kind of profits that keep stock prices rising.

After growing at a brisk 2.9 percent annual rate in the 1960s and early 1970s, productivity slowed to a paltry 1 percent from 1974 through 1995. Since then, it's been growing at around a 2 percent rate.

That's led some economists to speculate that the economy has embarked on a new era of productivity growth, driven by computers and other high-tech innovations.

However, within Tuesday's report were signs of the strain imposed on the economy by the world financial turmoil that began in Asia last year and has depressed U.S. export sales.

Manufacturing output, which represents 18 percent of the economy, declined at a 0.6 percent rate, the first drop since 1991, during the last recession.

Hours worked at factories fell even further, at a 4.1 percent rate. Productivity within the sector remained strong, growing at a 3.7 percent rate.

For all nonfarm businesses, output rose at a moderate 3.5 percent rate. Growth in hours worked was the smallest in a year, rising at a 1.2 percent rate. Unit labor costs, a key measure of inflation pressures, rose modestly, at a 1.7 percent rate, after shooting up at a 3.7 percent rate in the second quarter.

Written By Dave Skidmore