Nonfarm Productivity Fell 0.5% in the Fourth Quarter --- Although Output Slowed Due to Soft Economy, Workers Were Retained
WASHINGTON -- When the economy hit the brakes in the fourth quarter, so did productivity.</br></br>Take Georgia-Pacific Corp. It shelled out $1.3 billion last year to update and expand. But sliding prices for its paper and building products forced it to slow production in a hurry late last year, stunting productivity at the Atlanta company and bringing a fourth-quarter profit gain well below expectations.</br></br>Georgia-Pacific wasn't alone. The Commerce Department said productivity, or output divided by hours worked, dropped 0.5% at nonfarm U.S. businesses in the fourth quarter, compared with a 1.1% rise in the third. That means output climbed only 1.1% while hours worked surged 1.6%.</br></br>The numbers show that despite heavy investment in technology and tighter operations, companies have yet to achieve consistent productivity gains. For 1995 as a whole, productivity climbed 1.1%, the best increase since 1992 and far above 1994's gain of 0.5%. But economist Donald Ratajczak of Georgia State University still calls it "so-so." He expects it to pick up to about 1.5% this year and next, as companies adjust to a slower economy and begin operating their new, more-efficient tools.</br></br>When measured between the fourth quarters of 1994 and 1995, a more meaningful gauge, productivity climbed 0.8% compared with a year-to-year rise of 1.8% in the third quarter. That means it grew just under the trend, assuming the economy's potential annual growth rate is 2% and productivity is about half that (and also assuming 1% labor annual labor force growth).