WORKER OUTPUT LEAPS

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 5, 1993                   TAG: 9302050110
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium
WORKER OUTPUT LEAPS
The productivity of American workers shot up 2.7 percent in 1992, the largest gain in two decades, the government said Thursday.
The Labor Department said last year's increase in productivity, defined as output per number of hours worked, was a fivefold increase from the 0.5 percent advance in non-farm productivity in 1991.
The year ended on an especially good note, with productivity in the fourth quarter advancing 4 percent, a jump from the third quarter increase of 2.9 percent.
The remarkable surge drew the attention of economists and officials at the Federal Reserve. The big question is whether this change represents a trend after more than two decades of lagging productivity, or whether it is simply a temporary phenomenon reflecting a reluctance of businesses to rehire workers after the recession.
Economists are split on the answer. Some think productivity will return to its weaker levels once businesses finally become convinced that a recovery is under way and start rehiring workers.
But others said the 1992 increase is heralding a fundamental change in which American companies, especially in the service sector, are finding ways to boost productivity in long-lasting ways.
Bruce Steinberg, an economist at Merrill Lynch in New York, said the gains in productivity would mean the economy can grow at faster rates without increasing inflationary pressures.
The big gains in productivity last year did have a down side. By boosting production without boosting hiring, it meant the overall economy, as measured by the gross domestic product, could rise by 2.1 percent last year without a significant increase in employment.
The 2.7 percent increase for 1992 was the biggest rise in productivity since a 3.1 percent rise in 1972. Output rose 2.2 percent during the year while total hours worked decreased 0.5 percent, reflecting the high unemployment rates posted throughout the year.
Non-farm productivity growth averaged about 1.3 percent a year from 1982 to 1988, only slightly better than the 1.2 percent average of the 1970s. Both periods reflected productivity growth far below the 2.5 percent annual gain from 1947 to 1967, when the country was posting significant increases each year in living standards.

by Archana Subramaniam by CNB