AP News

Ahead of the Bell: US Productivity


WASHINGTON (AP) — U.S. workers were likely more productive this summer than initially thought, a sign that companies are finding ways to squeeze more from their employees without stepping up hiring.

Economists predict productivity grew at an annual rate of 2.7 percent in the July-September quarter, above the 1.9 percent increase estimated last month. Labor costs are expected to have fallen at a rate of 0.9 percent, faster than the initial decline of 0.1 percent.

The Labor Department will release the report at 8:30 a.m. EST Wednesday.

A sharp revision is expected because the economy grew faster in the third quarter than first estimated, while the number of hours worked was fairly stable. Productivity is the amount of output per hour of work.

Even with the gain, the trend in productivity has been fairly weak. Productivity has grown only 1.5 percent compared with a year ago. That's half the average growth that companies saw in 2009 and 2010, shortly after many laid off workers to cut costs during the Great Recession. And it's below the long-run growth of 2.2 percent a year dating back to 1947.

So companies may need to hire more workers if they see only modest gains in productivity and more demand for their products.

Economists predict worker productivity will slow for the rest of this year and through 2013. Higher productivity is typical during and after a recession, they note. Companies tend to shed workers in the face of falling demand and increase output from a smaller work force. Once the economy starts to grow, demand rises and companies eventually must add workers if they want to keep up.

The concern is that the pickup in growth seen in the July-September quarter may be fleeting. Many economists believe that growth has slowed from the 2.7 percent rate of the third quarter to below 2 percent in the current October-December period.

Growth at that level would not be enough to spur significant improvement in the unemployment rate. The government will release the November unemployment report on Friday.

The United States added a solid 171,000 jobs in October. But economists believe the November figures will be weaker, reflecting in part disruptions caused by Superstorm Sandy.


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