The Week Ahead

PRODUCTIVITY AND COSTS

Tuesday, Feb. 10, 10 a.m. EST -- Output per hour worked in the nonfarm business sector probably didn't change from the third quarter to the fourth. Output surged at about a 4% annual rate last quarter, but total hours worked at nonfarm businesses increased just as much. Even with no gain in the fourth quarter, productivity for all of 1997 probably grew a solid 2%, on top of a 1.6% gain in 1996. However, with no efficiency increase and compensation growing at about a 5% annual rate in the fourth quarter, unit labor costs are likely to have grown at a rapid 4% clip. That means unit labor costs grew about 1.9% for all of last year. Tight labor markets in 1998 indicate that wage growth will continue to accelerate and that productivity gains will be harder to come by, because companies already have hired the most skilled workers. Those trends will squeeze profit margins.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.