Newspaper article THE JOURNAL RECORD

Productivity Up

Newspaper article THE JOURNAL RECORD

Productivity Up

Article excerpt

WASHINGTON (AP) -- The nation's productivity rose at a stronger- than-expected pace in the first three months of the year as the economy continued to demonstrate an ability to generate rapid growth without inflation.

The Labor Department reported Tuesday that productivity, measured as the amount of output per hour of work, climbed at an annual rate of 4 percent in the January-March quarter, fully 1 percentage point higher than private economists had been expecting.

"The new economic paradigm still lives," said Marilyn Schaja, economist at Donaldson, Lufkin & Jenrette. "Because of strong productivity gains, economic activity can take place at a strong pace without a surge in inflationary pressures." Productivity is considered the key measurement to support future increases in living standards. Faster growth in productivity means that companies can pay their workers more, financing the raises by increased output rather than increased prices. The absence of price increases means workers' pay raises go even further. No less an authority than Federal Reserve Chairman Alan Greenspan said in a speech last week that he believed the recent solid advances in productivity, after decades of productivity weakness, marked a fundamental change in the U.S. economy and represented a payoff for business investments in computers and other productivity-enhancing tools. While warning that productivity cannot keep inflation forever at bay, Greenspan called the combination of rapid growth, the lowest unemployment rates in nearly three decades and low inflation rates "truly phenomenal." Financial markets took a nosedive after the speech, however, focusing instead on Greenspan's worries that at some point rising wage pressures will overwhelm the productivity gains and spark higher inflation. Analysts said Tuesday's report should allay Greenspan's worries. …

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