US productivity slips

US workers productivity gains have slowed

The improvement in US productivity is no longer as impressive as it was, according to figures released by the US Labor department on Tuesday.

The increase in productivity of US workers, which is seen as a crucial indicator for the future health of the economy, slipped by 0.8% to 2.2% in the final three months of 2000.

Growth in productivity is a measure of the amount of output by workers per hour of work.

The lower rate of productivity follows a recent warning by Federal Reserve chairman Alan Greenspan that the slowdown in the US economy has yet to run its full course.

Still a healthy gain?

In the third quarter of 2000, productivity was growing at 3%, according to the US Labor Department.

The productivity of US workers affects the general health of the economy

But the rate of 2.2% for the fourth quarter, which is a revised figure, is still considered a healthy gain by some.

Many analysts were expecting productivity to slip to 2%.

It was, however, weaker than the 2.4% rate forecast by the US government.

The new rate is also the smallest increase in productivity since a 2.1% rate in the first quarter of 2000.

A final figure for the fourth quarter will be issued next month.

Rising living standards

Gains in productivity are also the key to rising living standards because they allow wages to increase without leading to higher inflation, which would offset higher wages.

Rising productivity in the US is widely attributed to large investments in computers and other technology by businesses.

Since 1995, US productivity has doubled.

Labour costs

But, in tandem with the productivity figures, labour costs in the fourth quarter increased by a rate of 4.3%.

This is the largest increase since the second quarter of 1999.

Labour costs are closely tied to inflation pressures.

The revised figure is up on a 3.2% rate in the third quarter. It also exceeds the figure of 4.1% estimated by the government a month ago.

'Exceptional' slowing

During his testimony before Congress, Mr Greenspan said the US economy showed an "exceptional degree" of slowing late last year.

He added that factors contributing to long-term productivity growth would need to remain in tact so that "retrenchment" in the economy could be limited.

The US Commerce Department recently revised downwards its estimate for US economic growth in the last three months of 2000.

It estimated year-on-year gross domestic product growth at 1.1% for the quarter, down from an earlier estimate of 1.4%.