U.S. Productivity Decline Is "Cyclical" Blip

By John S. McClenahen Business economists generally are discounting the fractional fall in U.S. productivity during this year's first calendar quarter, the first quarterly decline in some six years. In contrast to a 3% increase during 2000's first three months, non-farm productivity between January and March this year fell at an annual rate of 0.1%, as hours worked rose 2% and output increased only 1.9%, calculates the U.S. Labor Dept.'s Bureau of Labor Statistics. "However, the Federal Reserve likely will read the slight decline as a reflection of cyclical conditions rather than a fundamental deterioration in trend productivity growth," predicts Maury Harris, New York-based economist at UBS Warburg LLC. President Jerry J. Jasinowski of the Washington-based National Assn. of Manufacturers advances the cyclical argument as well. "It's clear that firms cut back hours worked in the fourth quarter [of 2000] in anticipation of slow growth in the first [quarter of 2001]. As it turned out, growth was stronger in the first quarter than many anticipated, and firms were forced to increase hours to compensate, which drastically lowered productivity for the quarter," Jasinowski says. "The productivity slowdown is a one-time cyclical affair due to the malaise that has engulfed the economy since last summer," Jasinowski judges. "As we move into recovery late this year, productivity should ramp up closer to the impressive rates witnessed last year."

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