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February 11, 2003
Productivity Declined in Late 2002
In the fourth quarter of 2002, productivity dipped 0.2 percent in the nonfarm business sector as output grew 0.8 percent but hours at work increased more, 1.0 percent, according to the Bureau of Labor Statistics of the U.S. Department of Labor.

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On an annual average basis, productivity rose 4.7 percent in 2002.

Hourly compensation in the nonfarm business sector rose 4.6 percent in the fourth quarter of 2002, down somewhat from the 5.4-percent rise of the third quarter. When the changes in consumer prices were taken into account, real hourly compensation increased 2.2 percent during the fourth quarter of 2002 and 3.4 percent one quarter earlier.

Unit labor costs rose 4.8 percent in the fourth quarter, after falling 0.1 percent in the third quarter of 2002.

Analysts tell USA Today that they are disappointed in the productivity numbers and some say they have concerns about the rise in unit labor costs.

"Firms are having difficulties controlling nonwage labor costs (in particular, health insurance costs)," says Jade Zelnik of RBS Greenwich Capital.

Manufacturing productivity grew 0.7 percent (seasonally adjusted annual rate) in the fourth quarter of 2002 as output fell 2.4 percent and hours fell further, 3.0 percent. This was the first drop in manufacturing output in a year. Hours of all persons in manufacturing fell in each of the last 10 quarters and have dropped in 16 quarters over the past five years. In the third quarter, total manufacturing productivity increased 5.5 percent (as revised), reflecting a 3.0-percent rise in output and a 2.4-percent decrease in hours.

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