Tucson CitizenTucson Citizen

Productivity rebounds while wage pressures ease

WASHINGTON – Productivity rebounded in the first three months of this year while wage pressures eased, both outcomes reflecting the country’s deep recession.

The Labor Department reported Thursday that productivity, the key ingredient to rising living standards, grew at a 0.8 percent annual rate in the January-March quarter, slightly better than the 0.6 percent increase that economists had expected.

Wage pressures, as measured by unit labor costs, increased at a 3.3 percent rate, higher than the 2.8 percent rise that economists had expected but lower than the 5.7 percent spike in the final three months of last year.

The 0.8 percent rise in productivity in the first quarter was a significant rebound from the final three months of last year, when productivity actually fell by 0.6 percent.

The improvement was a reflection of the massive layoffs that have been occurring as businesses struggle to trim costs to cope with a prolonged recession.

The government reported last week that the economy, as measured by the gross domestic product, contracted at an annual rate of 6.1 percent in the first three months of last year after falling by 6.3 percent in the fourth quarter, the worst six-month performance in a half century. GDP measures the economy’s total output of goods and services.

Reflecting the big drop in GDP, the productivity report showed output falling in the first three months of the year. However, the number of hours worked fell at an even faster clip. The combination of falling output and a faster decline in hours produced the improvement in productivity, which measures output per hour of work.

While the 3.3 percent rate of increase in unit labor costs was down from a 5.7 percent jump in the fourth quarter it is still well above the 0.9 percent rise in labor costs for all of last year. But economists believe the unit labor costs figure will decline further in coming quarters as the recession and rising unemployment dampen wage demands.

The recession, which is now the longest in the post World War II period and has eliminated more than 5 million jobs, is keeping a lid on wage pressures. Economists believe that will not change until a sustained rebound has started, something they don’t see occurring until late this year.

Productivity is considered the key ingredient needed for rising living standards because it allows businesses to pay their employees higher wages financed by the increased output. That means companies can increase employee compensation without raising prices.

More companies recently announced job cuts. Microsoft Corp. said Tuesday it was starting thousands of the 5,000 job cuts it announced in earlier this year and left the door open to even more layoffs. Chip maker Atmel Corp. last week said it would lay off 300 people, or 5 percent of its work force.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

Search site | Terms of service