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U.S. productivity still solid
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March 10, 1998: 11:18 a.m. ET
Productivity gained 1.6 percent, unit labor costs rose 3.5 percent in 4Q 1997
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NEW YORK (CNNfn) - U.S. business productivity registered solid gains in the fourth quarter of 1997 although the upswing fell modestly short of original estimates.
Non-farm productivity growth for the quarter - measured on a seasonally adjusted basis - was revised to 1.6 percent, down from previous estimates of 2 percent. The earlier number had quadrupled Wall Street predictions of a 0.5 percent gain.
Bonds responded little to the news as the 30-year benchmark Treasury remained nearly unchanged with a yield of 5.96 percent.
Productivity measures employees' output per hour worked. It is a prime factor in forecasting inflation trends since higher productivity means that employers can get more out of workers without increasing headcount or passing higher costs on to consumers.
While productivity softened, unit labor costs, a measure of inflation that factor heavily in the pricing of goods and services, rose at a 3.5 percent pace from October through December. The revised figure surpassed the previous estimate of 3 percent and also edged past a revised forecast of 3.3 percent.
The report reflected the mood of optimism pervading the U.S. economy.
Strong productivity figures can help inoculate an economy against any extreme behavior by allowing employers to do business with greater efficiencies.
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