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Fri, Nov 09, 2001 - Page 21 News List

US productivity increases


US productivity in the third quarter rose at the fastest pace in more than a year as companies relied on fewer workers to produce goods and services.

Productivity, a gauge of how much employees produce for every hour worked, increased at a faster-than-expected 2.7 percent annual rate from July through September, compared with a 2.2 percent pace in the prior three months, Labor Department figures showed. Analysts had expected a 2 percent rate of increase in the quarter, when the economy shrank for the first time since 1993.

Worker hours fell at a 3.6 percent annual rate in the third quarter, more than at any time since 1991 as US companies cut almost 250,000 jobs to save money in an economic slowdown. At the same time, companies such as Office Depot Inc installed new systems to improve efficiency.

"The relatively strong rise in productivity attests to firms' desperate efforts to remain price-competitive and protect battered profit margins by aggressively cutting back on their workforce," said Jade Zelnik, chief economist at Greenwich Capital Markets Inc.

The increase was the largest since a 6.3 percent surge in the second quarter last year, just before the economy started to slow.

The third-quarter pace compares with productivity increases that averaged 2.5 percent a year during 1996-2000, when the economy grew at an average rate of 4.1 percent.

Unit labor costs, or the amount paid for each unit of production, rose at a 1.8 percent rate in the third quarter, the slowest pace in a year. That compares with a 2.6 percent rate of increase in the second quarter.

Treasury securities rose for a third day on optimism that rising productivity will keep inflation in check and give Federal Reserve policy makers room to continue lowering interest rates until the economy starts to improve. The 5 percent note maturing in August 2011 rose 5/8 point, pushing down its yield 7 basis points to a three-year low of 4.18 percent.

Separately, the Fed reported that consumer borrowing rose by US$3.2 billion in September, following a 6.1 percent jump in August and a US$2.1 billion July decline. September's unexpected increase brought the average monthly gain for the past four months to US$1.6 billion.

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