ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, March 7, 1996 TAG: 9603070033
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
Productivity, the key factor in how fast living standards can rise, doubled in 1995; but in the eyes of some analysts, the increase was too modest, dimming hopes that two decades of American income stagnation could be ending.
The Labor Department reported Wednesday that productivity - output per hour of work - rose 1.1 percent last year after gains of 0.5 percent in 1994 and 0.2 percent in 1993.
Other analysts argued, however, that the government's overhauled statistics are still missing significant productivity growth in the service sector, which now accounts for 80 percent of the work force.
The figures for the previous years were significantly lower than earlier estimates because the government has switched to a new way of measuring output to correct for biases in computing total output, known as the gross domestic product.
Under the new measurements, productivity growth has averaged 1 percent so far in the 1990s, slightly lower than the 1.25 percent average annual gains in the 1980s. Both decades stand far below the 3.3 percent average yearly increases in the 1960s.
Before the revisions, productivity appeared to be rising at an annual rate of 1.66 percent in the 1990s, leading some economists to hail a new boom after two decades of weakness.
The productivity gains of the 1950s and 1960s fueled the boom in wages and living standards during that period. And the meager increases in productivity since 1973 are reflected in the fact that average hourly earnings, after adjusting for inflation, are lower now than they were in 1973.
Some analysts said Wednesday's report showed that forecasts of a productivity boom and rising wages were unfounded.
``We don't have a productivity boom,'' said David Wyss, chief financial economist at DRI-McGraw Hill Inc.
Other analysts noted that the wave of corporate layoffs in recent years should have boosted productivity as well as corporate profits, which have been rising sharply. And they said low inflation despite low unemployment reflected strength in productivity.
``I am suspicious of these numbers, but at the same time, I don't think we were ever close to getting back to the productivity gains we enjoyed in the 1960s and 1950s, given that our investment rate has been falling and we don't dominate the global economy any more,'' said Lawrence Chimerine, chief economist at the Economic Strategy Institute in Washington.
LENGTH: Medium: 53 lines ILLUSTRATION: GRAPHIC: Chart by AP.by CNB