Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 9, 1995 TAG: 9503090075
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
``We'll probably see further slowing [as the economy slackens] as we move through 1995,'' said Mark Zandi, an economist with Regional Financial Associates in West Chester, Pa.
``There's been some modest improvement related to strong investment, but most of the growth has been related to the business cycle,'' he said.
But Robert G. Dederick, an economist with the Northern Trust Co. in Chicago, said it is too early to tell whether recent productivity growth was due more to a strong economic expansion or to business modernization and restructuring.
``This year will be the test,'' he suggested. ``With the economy likely to grow more slowly, productivity should do the same unless we have moved into something more fundamental.''
The Labor Department said Wednesday that 1994 nonfarm productivity growth followed a 1.5 percent gain in 1993. Productivity last declined on an annual basis in 1989, when it fell 0.9 percent as the economy was nearing recession.
Productivity - output per number of hours worked - is a key measure of the nation's living standards and business competitiveness, because increases mean companies are making their goods more efficiently and at lower costs.
Productivity gains helped keep prices down last year. Unit labor costs - typically two-thirds of the cost of a product and a key measure of inflation - edged up 0.9 percent after rising 1.7 percent a year earlier. It was the smallest increase since 0.8 percent in 1964.
Zandi said there were signs of wage-cost acceleration that could lead to price increases, including a 1.7 percent annualized gain in the fourth quarter, up from a 0.1 percent decline in the prior three months.
And he noted that on a year-over-year basis, costs rose 1.9 percent in the final three months of 1994, compared to 0.3 percent in the first quarter.
The report also suggested workers did not fully share in the 2.2 percent productivity gain last year.
Hourly compensation, when adjusted for inflation, advanced 0.5 percent in 1994, a slight increase over the 0.2 percent gain in 1993 but down from 2 percent in 1992.
In the final quarter of 1994, productivity rose 1.7 percent at a seasonally adjusted annual rate, slower than the 1.8 percent initial estimate a month ago and down from the 3.2 percent advance in July-September.
Output in 1994 increased 5.2 percent, up from 4.1 percent a year earlier and the biggest annual advance since an 8.2 percent jump in 1984, when the government began keeping output records.
Total business productivity, including farming, increased 2.3 percent, up from 1.5 percent in 1993. It rose at a 1.7 percent rate in the fourth quarter.
by CNB