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

DATE: TUESDAY, June 5, 1990                   TAG: 9006050225
SECTION: BUSINESS                    PAGE: A3   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

U.S. PRODUCTIVITY OFF 2.7 PERCENT

American workers' productivity has plunged at a 2.7 percent annual rate so far this year, the poorest showing since the 1981-82 recession, as labor costs have continued to increase, the government said Monday.

"It's the worst of both possible worlds," said economist David Jones of Aubrey G. Lanston & Co.

Increased productivity, or getting each worker to produce more for each hour he or she works, is vital to increasing Americans' standard of living without inflation, many economists say.

"The first quarter is a very dismal statement on that score," said Allen Sinai, chief economist at the Boston Co.

Donald Ratajczak, director of Georgia State University's economic forecasting center, said poor productivity might mean Americans' standard of living "is going to drift backward."

It also weakens the nation's ability to compete internationally, analysts said.

While productivity was falling, unit labor costs, a key gauge of future price inflation, shot up at an annual rate of 7 percent. That's putting a squeeze on profits, Sinai said.

"Businesses can't keep on employing people at those costs with so little production," he said.

The 2.7 percent productivity drop was the worst performance since productivity fell at a rate of 5.5 percent in the fourth quarter of 1981, the Labor Department said.

Private analysts said much of the decline was related to the overall slowdown of the economy and was typical of an economy at the end of expansion.

The gross national product - the total output of goods and services - grew at a sluggish 1.3 percent annual rate for the first quarter.

Monday's report, which provided revised figures on the first quarter of 1990, showed the nation's lagging productivity was far worse than earlier reported. Original data showed productivity falling 1 percent.

The GNP growth of 1.3 percent had also been revised downward from preliminary data showing 2.1 percent growth.

The 7 percent jump in unit labor costs for the January-March period compared with a 4.5 percent increase during all of 1989.

Hourly labor costs - a major inflation measure for businesses - rose at an annual rate of 4.1 percent in the first quarter of 1990. Those costs increased by 5.5 percent for all of 1989.

The report provided one bit of good news - productivity in the manufacturing sector climbed 4.9 percent so far this year, a huge improvement over the 2 percent increase during all of 1989.

Unit labor costs in that sector dropped 1.3 percent, compared with the 2.2 percent increase during all of last year.

Jones said factory workers' productivity was encouraging because it might mean "businesses have become leaner and meaner with the financial restructuring of the 1980s."

by CNB