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

DATE: WEDNESDAY, February 8, 1995                   TAG: 9502090030
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WORKER PRODUCTIVITY TAKES BIG JUMP

American business productivity improved in 1994 for a fifth straight year, boosted by the largest output growth since 1984. At the same time, businesses held labor costs to the smallest gain in 30 years.

Productivity - defined as output per hours worked - jumped 2.2 percent, faster than the 1.5 percent advance in 1993. It was the fifth consecutive gain since productivity fell 0.9 percent in 1989, the Labor Department reported Tuesday.

Businesses held growth in unit labor costs - typically two-thirds of the cost of a product - to 0.9 percent, the smallest increase since a 0.8 percent rise in 1964. Costs have tapered off each year since they rose 5.1 percent in 1990.

``It says there is very little risk of inflationary pressures building,'' said Stephen S. Roach, an economist with Morgan Stanley & Co. in New York. Economists watch growth in productivity for insights into long-term economic trends.

Over time, productivity determines the nation's living standards and the competitiveness of its products overseas. Strong productivity is likely to hold off inflationary pressures.

Some analysts contend productivity growth will slow and possibly decline as companies continue to add workers and the current business cycle matures.

Others, like Roach, disagree.

``Employers are getting more out of their workers by re-engineering existing manufacturing and service processes, by using more information technology and by out-sourcing,'' he said.

``It's all part and parcel of the productivity revolution of 1990s, and I believe it's ongoing,'' he added.

Productivity growth slowed to a 1.8 percent seasonally adjusted annualized advance in the final three months of 1994, from a strong 3.2 percent in the previous quarter.

Output in 1994 jumped 5.2 percent, up from 4.1 percent a year earlier and the largest since an 8.2 percent surge in 1984 when the government began keeping output records.

Total hours worked last year rose 2.9 percent, faster than a 2.5 percent increase in 1993. In the final three months, hours worked were up at a 3.6 percent rate, compared with a 1.1 percent gain in the previous quarter.

by CNB