San José State University
Department of Economics

applet-magic.com
Thayer Watkins
Silicon Valley
& Tornado Alley
USA

Detailed Analysis of the Trends in U.S. Labor Productivity

The problem of employment recovery in the past had been the tendency for employers to meet the increased demand by working their current labor force longer hours. This shows up in the statistics as increased labor productivity. The graph below shows the trend for the business sector.

An increase in output per hour that comes from higher productivity due to better equipment or methods is a good thing for the economy. An increase in output per worker that comes simply from working people longer and harder is not really an increase in productivity and is not beneficial to the economy.

The productivity figures are worth looking at in detail. The table below gives the recent indices of not only productivity but also real compensation per hour and unit labor costs. As the figures show although the real compensation paid per hour has been increasing the cost of labor per unit of production generally has been declining since the third quarter of 2001. This is a dramatic development for the U.S. economy.

Productivity and Cost Indices
for the U.S. Business Sector
(1992=100)
Quarter Real Output
per hour
Real
Compensation
per hour
Unit Real
Labor Costs
2000 I 113.8 111.2 116.1
2000 II 116.0 110.8 114.4
2000 III 115.8 112.1 117.0
2000 IV 116.9 112.0 116.6
2001 I 116.9 112.5 118.2
2001 II 117.7 112.4 117.9
2001 III 118.2 112.9 118.2
2001 IV 120.4 114.2 117.0
2002 I 122.8 114.1 115.5
2002 II 123.3 113.7 117.2
2002 III 124.7 113.5 116.3
2002 IV 125.4 113.5 116.3
2003 I 126.4 113.8 116.8
2003 II 128.6 115.1 116.4
2003 III 131.3 115.6 115.6
2003 IV 131.9 115.9 116.0
2004 I 133.4 118.4 115.7
2004 II 134.2 118.6 116.4
2004 III 135.0 119.2 116.8

(To be continued.)


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