|Topic||Productivity and Growth|
|Key Words||Productivity, Growth, Standard of Living, Inflation|
The US Commerce Department reported that the productivity of American workers rose in the second quarter of 2001 at an annual rate of 2.5 percent. Because of the economic slowdown, analysts had expected a smaller rate of growth. The increase in productivity compares to a revised annual average of 2.6 percent for the 1997 to 2000 period. In the first quarter of 2001 productivity grew at an annual rate of 0.1 percent.
Productivity data are considered to be one of the most important indicators
of the economy's potential for economic growth. When productivity is increasing
rapidly, both corporate profits and workers' wages can increase without
causing inflation to accelerate. Federal Reserve Board Chairman Alan Greenspan
believes that technological advances have made American companies more
efficient. Because productivity increases reduce the pressure on firms
to raise prices when their labor costs rise, the Fed believes that it
has greater latitude to pursue a low-interest-rate policy. During the
1972 to 1995 period, worker productivity averaged 1.2 percent per year.
Since 1995 productivity growth accelerated. Previous estimates had productivity
increases at 3.2 percent annually, but the Bureau of Labor Statistics
revised its data and lowered the rate of increase to 2.6 percent.
(Updated September 1, 2001)
|Source||David Leonhardt, "Productivity Still Gaining Despite Slump," The New York Times, August 8, 2001.|
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