Productivity up, but cut in worker hours largest since '75

Mary Knox Merrill/The Christian Science Monitor/File
Due to a decline in customers, Tina Drouin's working hours were cut earlier this year at Bon Bon, a candy and gelato shop in Boston. US employers cut worker hours in the first quarter of 2009 by the largest amount in 34 years, the federal government reported Thursday.

US productivity in the first quarter rose at an annual 1.8 percent rate in the first three months of 2009, substantially higher than the 1.1 percent quarter-to-quarter change originally reported. But that was still less than last year's average, the Labor Department said Thursday.

The report also confirmed that businesses cut the hours of their workers by the largest margin since 1975. For some sectors, the declines in output were the largest on record.

The data suggest that American companies continue to cut costs by trimming their workers' time on the job rather than their pay and benefits. Indeed, American workers' hourly compensation (which includes benefits and taxes) rose at an annual rate of 4.5 percent in the first quarter compared with the previous quarter, the Labor Department said.

That trend is consistent with the mild 2001 recession, but not earlier ones that were more severe, writes Casey Mulligan, an economist at the University of Chicago, in an e-mail. "Real compensation fell significantly in several other recessions, such as the 1980-82 recession that is a common benchmark these days."

The trend was most obvious in manufacturing, where output plunged 21.7 percent and hours 19.5 percent from the previous quarter – the biggest decreases since the Labor Department's current data series began in 1987. But over the past four quarters, unit labor costs (which measures compensation and productivity) rose 12 percent, also a record.

For nonfinancial corporations, output fell 12.3 percent from the previous quarter, the largest decline since the federal government began tracking it in 1958.

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