U.S. productivity rises 2.7 percent in 2005, labor costs jump

U.S. productivity of nonfarm business rose by 2.7 percent in 2005, the smallest gain since a 2.5 percent increase in 2001, the Labor Department reported Thursday.

But the growth rate in productivity last year was still slightly above the average for the past 50 years.

Last year's labor costs, a key gauge of wage pressures, jumped 2.4 percent last year, marking the biggest advance since a 4.2 percent surge in 2000.

For the final quarter of 2005, productivity fell by 0.6 percent, the first decline since early 2001, and labor costs were up 2.4 percent.

Productivity, the amount of output produced for each hour of work, is the key factor in boosting living standards because it allows companies to pay their workers more based on their increased efficiency without having to resort to raising the price of their products, which would increase inflation.

In the United States, productivity has accelerated since the mid-1990s as the economy benefited from the growing use of high-tech tools such as computers and the Internet.

Productivity grew by 4 percent in 2001, the year when the economy was in recession, 3.8 percent in 2003 and 3.4 percent in 2004.

The slowdown in productivity growth in 2005 and rising labor costs would attract attention at the Federal Reserve, analysts say. The central bank is worried that rising wage pressures could boost inflation.

Source: Xinhua