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Productivity gains ease
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June 6, 2000: 9:24 a.m. ET
1Q worker productivity gains unrevised 2.4%; wholesale inventories rise
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NEW YORK (CNNfn) - Productivity among U.S. workers rose at a slower pace in the first quarter while wage costs increased slightly, according to revised numbers released by the government Tuesday, confirming that work force efficiency faltered somewhat in the first three months of the year.
Separately, the Commerce Department reported that wholesale sales advanced at a slower-than-expected pace in April, while manufacturers stockpiled inventories at a faster pace than anticipated.
 Productivity, a measure of worker output per hour, rose at an unrevised annual rate of 2.4 percent in the first three months of 2000 from the fourth quarter of 1999, the Labor Department said. That was in line with economists' forecasts, though less than half the 6.9 percent surge recorded in the fourth quarter.
While below what has been seen in other quarters, the productivity advance was still the best showing in seven years when compared with the same period a year earlier, the Labor Department said. On a year-to-year basis, productivity advanced at a 3.7 percent pace.
"Productivity, so far, has really enabled the economy to grow at a more rapid pace than normal without generating any kind of substantial increase in wage pressures," said Kim Rupert, a senior economist with Standard & Poor's MMS in San Francisco.
A subdued market reaction
The U.S. economy advanced at a 5.4 percent pace in the first three months of the year, slower than the 7.3 percent rate recorded in the fourth quarter of 1999, though still above the 3-to-3.5 percent pace of growth that most economists and Federal Reserve officials consider non-inflationary.
 Wall Street registered little reaction to the numbers, which were almost unchanged from what the Labor Department reported about a month ago. At that time, news of significantly lower worker productivity compared with the fourth quarter sent U.S. stock markets tumbling.
The numbers, while essentially old news, "serve as a reminder that the fundamentals of the inflation picture are still extremely good," said Ian Shepherdson, chief U.S. economist with High Frequency Economics.
Advances in technology, from faster computer chips to wireless phones to new ways to move information quickly from one end of the world to the other, have allowed workers to be more efficient -- boosting corporate profits by allowing companies to keep their costs in check.
Labor costs, a measure of what companies spend on workers' wages, salaries and benefits, rose 1.6 percent, also in line with analysts' expectations, though a little less than the 1.8 percent figure initially reported.
Wholesale sales muted, inventories up
The numbers followed on the heels of last Friday's May employment report, which provided analysts and investors with the most solid piece of evidence to date that the Federal Reserve's six rate increases are beginning to slow the economy. Excluding government positions, the economy shed 116,000 jobs last month, sending the jobless rate to 4.1 percent from 3.9 percent.
 Because of recent indicators showing economic activity is slowing, most economists now expect the Fed will leave short-term interest rates unchanged at the conclusion of their two-day policy meeting on June 27-28. The bellwether fed funds rate, the rate at which commercial banks lend to each other overnight, currently rests at 6.50 percent.
Separately, the Commerce Department reported Tuesday that wholesale sales rose 0.3 percent in April, significantly less than the 1 percent advance recorded in March. Inventories among wholesalers gained 0.8 percent, slightly more than the revised 0.6 percent gain registered in March.
Combined, the numbers indicated that manufacturers are selling less and stockpiling more -- more evidence that the robust pace of the U.S. economy, now in its 111th and record month of expansion, may be slowing down. 
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