Manufacturing Productivity Soars, Job Claims Plunge

By John S. McClenahen Productivity in the manufacturing sector of the U.S. economy rose at a seasonally adjusted annual rate of 8.6% from July through September this year, even higher than the 8.1% rate for the entire nonfarm business sector of the economy, the U.S. Labor Department reported on Nov. 6. Productivity among durable-goods producers rose 14.7% and among manufacturers of nondurables, 2.3%. In contrast, U.S. manufacturing productivity increased 3.1% during the second calendar quarter of this year, just over a third as fast as in the third quarter. Third-quarter productivity gains for both manufacturing and the overall nonfarm business sector were, in part, a result of significant changes in output. After three consecutive quarters of decline, manufacturing output increased 2.9% during the third quarter of this year. Output in the nonfarm business sector grew 8.8% in the third quarter, faster than at any time since 1992's fourth quarter, says the Labor Department. In manufacturing, the number of hours worked fell 5.2%; in the nonfarm business sector, hours rose 0.7%. However, a key labor question remains: Is the U.S. economy going to start generating a significant number of jobs anytime soon? The latest data on initial claims for unemployment insurance suggest conditions are improving. For the week ending Nov. 1, initial claims totaled 348,000, down 43,000 from the previous week's revised figure of 391,000. And the department's four-week moving average for initial claims, which smooths out week-to-week changes, also continued to fall. Last week it was at 380,000, a decrease of 10,000 from the previous week's revised average of 390,000. "For the economic expansion to become self-sustaining, employers must respond to the government stimulus packages and faster demand growth by not just becoming more productive but by actually going out and hiring full-time employees," says David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York.

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