[lbo-talk] Greater Worker Efficiency Equals Less Job Security

Dwayne Monroe idoru345 at yahoo.com
Thu Sep 4 07:32:27 PDT 2003


[At least, that's the claim made within the body of a WSJ piece on increased factory orders and service sector activity show "strength". Looks fishy to me. Anyone care to dissect? - DRM]

< begin excerpt> Over the long run, productivity growth increases prosperity by allowing businesses to raise wages without boosting prices. But the increasing efficiency of workers has proved to be a threat to their own job security. Since the start of the year, businesses have cut nearly half a million jobs. They have done so despite stronger economic growth and rising consumer spending -- and producing more with fewer workers is one of the reasons. < end excerpt >

URL:

http://online.wsj.com/article/0,,SB10626784182436000,00.html

..........

Factory Orders Climb 1.6%; Service Sector Shows Strength

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP

WASHINGTON -- Orders to U.S. factories rose for the third straight month in July, offering further evidence of a rebound in the manufacturing sector. The service sector also continued to show strength.

In other reports released Thursday, second-quarter worker productivity was revised to show its biggest gain in more than a year, and jobless claims last week jumped to their highest level since mid-July. The data underscored some of the strains facing workers even as the economy shows signs of gaining momentum.

Factory orders rose 1.6% to $329.39 billion in July, the Commerce Department said Thursday. The July increase followed a revised 1.9% rise in June, previously estimated as a 1.7% climb.

July durable-goods orders, first reported Aug 26, were unrevised at up 1.0%.

The factory data was much stronger than Wall Street had expected. Analysts had predicted factory orders would rise by 0.8% for the month.

The factory orders numbers add to recent economic reports pointing to continued firming in the manufacturing sector. The Institute for Supply Management reported Wednesday that manufacturing activity grew for the second straight month.

The ISM's index for nonmanufacturing activity came out Thursday, and it showed that the service sector expanded last month at the same rate -- 65.1 -- as in July. A reading above 50 indicates expansion.

Productivity Improves

Growth in nonfarm worker productivity was revised to a seasonally adjusted annual rate of 6.8% from the 5.7% previously estimated, marking the largest increase since the first quarter of 2002. Economists surveyed by Dow Jones Newswires and CNBC had forecast productivity growth of 6.3%.

In a separate report, the Labor Department said first-time claims for unemployment benefits rose by 15,000 to 413,000 in the week ended Saturday. Economists had projected claims would fall by 4,000.

The jump propelled the four-week moving average, which smooths out weekly fluctuations, to 401,500, the first time in five weeks that it cracked the 400,000 mark that economists say indicates a stabilizing job market. Claims below that threshold had fueled hopes that the pace of layoffs was stabilizing.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the underlying trend in claims is still downward. He said that while it will take a while for the average to get below 350,000 claims, he predicted that favorable seasonal-adjustment factors will put the figure back below 400,000 next week.

The big upward revision in productivity -- a measure of output per hour worked -- stemmed from revised estimates of U.S. economic growth that showed higher output, the Labor Department said. Output grew 4.4% in the second quarter, instead of the 3.4% gain first reported.

Over the long run, productivity growth increases prosperity by allowing businesses to raise wages without boosting prices. But the increasing efficiency of workers has proved to be a threat to their own job security. Since the start of the year, businesses have cut nearly half a million jobs. They have done so despite stronger economic growth and rising consumer spending -- and producing more with fewer workers is one of the reasons.

Although recent economic reports have signaled that the economy may be rebounding, businesses remain cautious when it comes to hiring workers, preferring to see profits improve and to feel more confident about the recovery before boosting payrolls.

The Labor Department said unit labor costs fell 2.3% in the second quarter, revised from an initial estimate of a 2.1% drop.

Workers hours fell 2.8% in the second quarter, revised from an initial estimate of a 2.2% drop.

The manufacturing sector saw a revised productivity gain of 3.7%, revised down from an initial estimate of 4.2%.

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