Productivity rises as labor costs fall

The economy

March 08, 2000|By BLOOMBERG NEWS

WASHINGTON -- U.S. worker productivity in the fourth quarter of 1999 grew at the fastest pace in seven years and labor costs fell for the second straight quarter, the Labor Department said yesterday.

Productivity, a gauge of output per hour worked, rose at a 6.4 percent annual rate in the final three months of the year. That's up from the third quarter's 5 percent pace and reflected the fastest rate of economic growth in 3 1/2 years.

While that's good news for the economy because it suggests businesses are finding new ways to absorb increases in labor costs and avoid raising prices, it's unlikely to stop Federal Reserve policy-makers from pushing interest rates higher in the coming months to keep the economy from overheating.

Fed Chairman Alan Greenspan, usually a cheerleader for technology, warned Monday that productivity and stock gains have made businesses and consumers too optimistic about the economy's ability to expand without triggering inflation. It also "gives consumers more confidence to continue spending in a robust fashion," said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York.

Underscoring that, consumer debt surged $17 billion in January, the largest gain in almost five years, Fed figures showed yesterday. Credit card charges and auto loans fueled the rise, which followed increases of $10.4 billion in December and $13.2 billion in November.

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