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Wednesday, 5 September, 2001, 20:06 GMT 21:06 UK
Productivity resurgent in US economy
Graph of second quarter productivity
By BBC News Online's North America business reporter, David Schepp

The "New Economy" is different.

That was the mantra extolled by those tech pundits who said the internet was not susceptible to the normal ups and downs of the business cycle.

The recent downturn in the US economy has proved them wrong, but at least one vestige of the New Economy has re-emerged amid the technology rout.

Federal Reserve Chairman in testimony before the US Congress
Fed chairman Alan Greenspan says worker productivity has kept inflation in check
US worker productivity, a hallmark of the tech economy and credited with much of the hefty profits American business enjoyed in the buoyant years of the late '90s, has showed surprising resilience in the face of the American slowdown.

On Wednesday, the US Labor Department said the amount of goods and services produced by those in jobs not related to agriculture rose by 2.1% during the three-month period from April to June.

Gains in worker productivity are a boon for the nation's economy for a number of reasons, not the least of which is the ability to increase wages without having to raise the price of products and services.

Better than expected

The 2.1% rise, while revised downward from a previously 2.5% gain, was still better than analyst predictions. It also far exceeded the meagre 0.1% advance during the first three months of 2001.

The slight 0.1% gain during the first quarter was blamed on a reduction of the number of goods and services produced that fell faster than the number of jobs.

American business has responded in recent months by slashing jobs, especially within the tech sector, announcing hundreds of thousands of job cuts.

A report by outplacement firm Challenger Gray & Christmas showed that while the pace of jobs cuts slowed in August, nearly a million Americans have received pink slips as a result of the slowing US economy, a rise of 83% over last year.

The Chicago-based firm warned, however, that still more job cuts may be in store. "There is no evidence reported by any industry that anything that could be called a significant sustainable rebound is on the horizon for this year or early next year," the report said.

Wage inflation

Another key measure related to the workplace, unit labour costs, a gauge of the increasing costs of wages, showed promise, edging ahead just 2.7% for the second quarter, nearly half its rise in for the first quarter.

American productivity and labour costs are closely eyed by Federal Reserve chairman Alan Greenspan. In recent years, he has credited rises in productivity for growing the US economy by leaps and bounds with scant inflation.

Tamed inflation also gives the Fed more room in cutting interest rates, which the central bank has done seven times this year in hopes of reviving the flagging US economy.

Productivity and wages were among many topics discussed by Mr Greenspan and other policymakers at last weekend's meeting in Jackson Hole, Wyoming.

Despite the rebound in productivity, the US economy has barely grown this year as measured by gross domestic product edging ahead just 0.2%, during the second quarter.


Terror's impact

Signs of a slowdown

Rate cuts

Analysis

Key players

FULL SPECIAL REPORT
See also:

27 Aug 01 | Business
Fresh signs of US slowdown
21 Aug 01 | Business
Q&A: What caused the US slowdown?
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