U.S. Productivity Rises While Jobless Claims Fall

By John S. McClenahen Just a day after the Federal Open Market Committee cut U.S. short-term interest rates to a 41-year low of 1.25%, the U.S. Labor Department issued two economically encouraging reports on productivity and jobless claims. The amount of work people did every hour in the non-farm business sector of the U.S. economy grew at a healthy 4% annual rate during the July-through-September quarter of this year. That's far better than the second quarter's 1.7% productivity gain. Manufacturing posted another impressive gain in this year's third calendar quarter, a 5.9% increase that was nearly two percentage points better than the second quarter's 4.2%. "We believe that a high rate of R&D spending, high patent applications and the lagged effects of previous investment will sustain rapid productivity growth in the year ahead," says Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. Meanwhile, initial claims for unemployment insurance fell to 390,000 for the week ending Nov. 2, a decline of 20,000 from the revised figure of 410,000 claims in the previous week. The Labor Department's four-week moving average for initial claims remained above the 400,000 mark, however, confirming the continued existence of a "soft spot" in the U.S. economy and making Nov. 6's interest-rate cut seem well-timed. "The high level of both initial and continuing claims remains consistent with feeble job creation," notes Harris.

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