Productivity Numbers A Mixed Bag

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U.S. productivity, a strong indicator of economic health, went up just 1.6 percent in the first quarter of 2011.  Other than a decrease of 1.7 percent in the 2nd quarter of 2010, this is the smallest increase in non farm productivity since the first quarter of 2009.

According to Bloomberg Businessweek, “A slowdown in productivity growth typically is bad for the economy in the long run. But it can be good in the short term when unemployment is high, because it could signal that companies must hire more workers in order to make further gains.”

One sector of the economy that showed an impressive increase in productivity was manufacturing.  Manufacturing sector productivity grew 6.3 percent, as output increased 9.7 percent and hours worked increased 3.3 percent.

Over the last four quarters, manufacturing productivity increased 4.7 percent. In the first quarter of 2011, productivity increased 9.8 percent in the durable goods sector and 4.5 percent in the nondurable goods sector. In durable goods industries, a 16.4 percent jump in output outweighed a 6.1-percent increase in hours worked; this gain in output is the largest in the series. Nondurable goods production rose 3.3 percent while hours fell 1.2 percent.

These numbers are a mixed bag at best, but the impressive increase in manufacturing productivity is a good sign for the economic recovery.  Hopefully, the broader productivity number will follow suit in the coming months.

 

By Marie Larsen