U.S. businesses continued to improve productivity in 1987 but were less successful in squeezing out more efficiency than they had been in the previous four years, the government said yesterday.
Productivity among nonfarm businesses slowed to a 0.8 percent improvement for the year, half the 1.6 percent gain of 1986, despite the lowest hourly labor cost increases in more than four decades, the Labor Department said.
And from October through December, businesses became less efficient rather than more efficient, the first quarter in which that was the case since the summer of 1986, officials at the Bureau of Labor Statistics said.
The showing among nonfarm businesses, which account for about three-fourths of the nation's economic activity, was the worst since 1982, when a recession depressed output so much that productivity for the year declined by 0.6 percent.
Among manufacturers, which account for one-fourth of the nation's economic output, productivity improvements also fell to their lowest pace since 1982 despite continued reductions in labor costs.
Last year's efficiency gains in manufacturing amounted to 3.3 percent, compared with an increase of 3.7 percent in 1986 and annual improvements averaging 5.5 percent from 1983 through 1985.
The figures renewed fears of inflation and slower growth among some economists. Others, however, said the poor efficiency figures were more the result of a hiring boom in the final three months of last year, the biggest since 1984, rather than any new flabbiness.
"The way it changed was not altogether bad," said Robert Ortner, the undersecretary of Commerce. He said output continued to do well and that the big increase in hours worked was largely due to the big increase in employment.
However, Allen Sinai, chief economist for the Boston Co., said the numbers indicate potential problems. "If this poor performance continued, it would be highly inflationary," Sinai said, citing a 3.7 percent annual increase in unit labor costs during the fourth quarter.
Sandra Shaber, an economist for the Futures Group, a Washington consulting firm, said, "Wage rates are now so low in the United States that in many industries it's cheaper to hire more workers than buy machines for becoming more efficient," she said. "That might be great for business, but it doesn't do much for raising the standard of living."