Productivity surges 8.6% in first quarter

In the first three months of 2002, worker output of goods and services per hour outside the farm sector grew at the fastest clip since a 9.9% growth in second-quarter 1983, said the United States Department of Labor.

The 8.6% surge in non-farm productivity surpassed Wall Street's expectations. That was after a revised 5.5% productivity growth in the last three months of 2001.

But the improvement came at a price. Businesses, responding to the lingering effects of last year's recession, cut back on their payrolls. That caused the total number of hours worked to fall at a rate of 1.9%. Output rose at a 6.5% rate, however.

Economists such as Gary Thayer of A G Edwards & Sons Inc said there is little worry of inflation, giving Federal Reserve officials even more leeway to hold rates steady at 40-year lows.

Unit labor costs fell 5.4% during the quarter. It was the steepest decline since a 6.5% drop in second-quarter 1983. In manufacturing, unit labor costs declined by 6.5%, the biggest falloff in more than 40 years.

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