Productivity rises in quarter, weak for year
WASHINGTON -- Workers stepped up their efficiency in the final three months of 2006, yet productivity still turned in the weakest yearly performance in almost a decade.
The Labor Department reported yesterday that productivity, the amount of output per hour of work, rose at a 3 percent annual rate for October through December. That compares with a 0.1 percent decline in three previous months.
For the entire year, productivity edged up by 2.1 percent, the weakest performance since a 1.6 percent rise in 1997.
Productivity is the vital element needed to boost living standards. It allows businesses to pay workers more, because of their increased output, without having to raise the cost of their products.
A gauge of wage pressures tied to productivity jumped by 3.2 percent last year, the biggest annual increase in six years.
But over the final three months of 2006, the cost of labor per unit of output did improve. It slowed to an increase of 1.7 percent, compared with a 3.2 percent rise from July through September.
Rising wages are good for workers. The concern is that if wage increases outstrip gains in productivity, businesses will start raising prices, setting off a classic wage-price spiral. 