The Bureau of Labor Statistics of the U.S. Department of Labor today reported preliminary productivity data -- as measured by output per hour of all persons -- for the third quarter of 1995. The preliminary seasonally-adjusted annual rate of productivity growth in the business sector was 2.1%. Output rose 4.9%, and hours worked by all persons engaged in the business sector increased 2.8%.

The output component of productivity is based on measurements of the gross domestic product prepared by the Commerce Department's Bureau of Economic Analysis.

The primary source of hours and employment data is the Bureau of Labor Statistics Current Employment Statistics program, which provides monthly data on total employment and average weekly hours for workers in nonagricultural establishments. The change in hours worked for the quarter reflected 1.4% increases in both employment and average weekly hours. This was the first increase in average weekly hours in 1995. Average weekly hours fell by 2.8% in the second quarter and 0.5% in the first.

Productivity is commonly described in terms of the relationship between real output and the labor time involved in the production of that output. But, in actuality, the productivity figures reflect the joint effects of many influences, including changes in technology; capital investment; level of output; use of capacity, energy, and materials; the organization of production; managerial skill; and the characteristics and effort of the work force.

To get a better perspective on the productivity picture, let's take a look at the data since the beginning of 1993. During this eleven-quarter period output increased in every quarter, hours worked increased in all but one quarter, and productivity increased in all but two quarters. During this period, BLS inflation-adjusted indexes for output, hours worked and productivity rose, respectively, at annual rates of 4.66%, 2.26%, and 2.22%. During this same period real compensation per hour rose at an annualized rate of only 0.27%. This year, real compensation per hour rose at an annualized rate of 0.87% -- further evidence that inflation due to wage increases is dormant.

In other news, the Commerce Department reported that the nation's wholesalers reduced their excess inventories by 0.2% during September. The reduction was led by big ticket items like cars and furniture.

In still other news, Mitsubishi/Wertheim-Schroeder reported that chain store sales increased by 0.7% last week. In a similar vein, the Johnson Redbook weekly survey of retail sales showed an increase of 2.3% for the first week of November compared to the same week for the month before. The rise in retail sales was attributed to cold weather. Looks like everybody suddenly realized they might need a new coat or a pair of long johns. Or, maybe the official opening of the Christmas shopping season has been slipped back to the day after Halloween.

Summing up: Customers of retail stores have temporarily picked up their buying, and wholesalers of big ticket items seem to finally be selling down some of their excess inventories. Both of these are positive signs for the economy. But, in view of the established trend of miniscule growth in real wages, it is questionable how long this temporary resurgence of activity can be sustained.

Byline: Lafferty (MF Merlin)