ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, February 12, 1997 TAG: 9702120070
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Productivity, the key measurement of how fast living standards can rise, increased 0.8 percent in 1996. It was the best in four years, though still lackluster, and economists predict more of the same for 1997.
Though last year's increase in nonfarm productivity more than doubled the 0.3 percent gain in 1995, it nevertheless lagged far behind the typical increases that fueled the rapid improvement in American living standards in the decades after World War II.
Productivity measures output per hour of work and its sluggishness over the past two decades is viewed as the root of many economic problems, from worker insecurity to slow income growth.
``It does indicate a constraint on our potential growth,'' said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla.
Productivity tends to increase rapidly in the early stages of an economic expansion, as unused operating capacity comes back on line, and slows as the expansion matures. Given that the current expansion is nearing its sixth anniversary, some analysts said the 1996 performance wasn't so bad.
``Basically the long-term trend in productivity is estimated at about 1 percent a year,'' said economist Carl Palash of MCM MoneyWatch in New York. ``So the fact that it's staying close to trend is a very good development.''
It was a far cry from the 1950s and 1960s, when productivity routinely advanced 2 percent or more per year. But 1996 marked the best showing since productivity shot up 3.2 percent in 1992, following the 1990-91 recession.
The Labor Department said Tuesday that last year's gain was boosted by a strong 2.2 percent advance, at an annual rate, in the October-December quarter, the best in three years.
The government said unit labor costs - which take account of both hourly wages and productivity - rose at a 1.4 percent annual rate in the fourth quarter, down from 3.3 percent in the previous quarter. For the year, unit labor costs rose 2.9 percent, the same as in 1995.
LENGTH: Short : 44 linesby CNB