Big Drop In Manufacturing Productivity Heightens Concern

By John S. McClenahen Particularly in manufacturing, where output and work hours tend to vary more than in the aggregate U.S. business economy, one calendar quarter's productivity numbers don't make for a trend. Nevertheless, fresh first-quarter 2001 data from the U.S. Labor Dept.'s Bureau of Labor Statistics (BLS) are cause for some concern. The 2.1% decline in manufacturing productivity from the final quarter of 2000 was the largest decline in labor productivity in U.S. manufacturing since the third calendar quarter of 1989, when it fell 3.2% The BLS had previously figured that labor productivity in manufacturing rose in the first quarter, at a 0.3% annual rate. Among companies producing appliances, cars, and other durable goods, labor productivity fell 2.4% in this year's first quarter, as output fell 9.3% and hours worked shrunk by 7.1% The productivity decline among nondurable goods producers was not as great -- off 2% -- as output dropped 5.8% and hours fell 3.8%. "The first quarter was dominated by a huge runoff in inventories, and that contributed to the downward revision in productivity," says Jerry J. Jasinowski, president of the National Assn. of Manufacturers, Washington. "But even as inventories were being worked off, there was a new threat: Both consumer spending and business investment slowed." That could mean that the U.S. economic recovery that some sense is imminent won't occur until much later this year -- or the early months of 2002.

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