NCPA - National Center for Policy Analysis

Productivity Breakout?

February 10, 1999

The output of U.S. workers surged ahead last year, suggesting productivity growth may be breaking out of a 25-year slump. Productivity measures the efficiency of work -- such as the output of goods and services per hour worked.

  • Productivity of non-farm businesses surged 2.5 percent last year -- more than double the average growth rate since 1973 and the biggest jump since 1992.
  • The Labor Department reported yesterday that fourth quarter 1998 productivity rose at a seasonally-adjusted annual rate of 3.7 percent from the third quarter.
  • For the year, unit labor costs rose 1.5 percent -- compared with a 2.1 percent increase in 1997.
  • Growth was greatest in the manufacturing sector, where productivity jumped 4.3 percent during 1998.

When workers produce more for each hour of work, employers can raise wages and benefits without raising prices or squeezing profits.

From 1948 until 1973, annual productivity growth averaged about 2.8 percent. Then it slowed to about 1 percent a year. Growth from 1992 to 1995 averaged only 1.2 percent. Over the past three years, it increased to an average of about 2.2 percent.

Source: Alejandro Bodipo-Memba, "U.S. Productivity Surged During 1998, Hinting at Escape from 25-Year Slump," Wall Street Journal, February 10, 1999.


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