Productivity blues

4 May 2007 By Martin Hutchinson

The reported increase in productivity helped push the stock market to a sixyear high. But over 20 years, the US record is still middling. It s likely to slip further, since US companies have preferred financial engineering to the real sort.

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Productivity rose at an annual rate of 1.3% in the business sector and 1.7% in the nonfarm business sector in the first quarter of 2007. Compared with the first quarter of 2006, productivity increased 0.9% in the business sector and 1.1% in the nonfarm business sector.

Unit labour costs in the business sector grew 0.7% in the first quarter compared with 6.2% in the fourth quarter of 2006. However that figure is distorted by a shift in the timing of bonus payments in the statistics from the first quarter to the fourth quarter. In the fourth and first quarters combined, unit labour costs in the business sector were 2.4% above the same period in the previous year.

Productivity growth in the United States for the 20 years to 2006 was 2.0% per annum, according to the Groningen Group. Over the same period, the annual rate of productivity growth in Britain was 2.1%, in France 2.0%, in Sweden 1.9% and in Japan 2.5%.

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