Feb. 5 (Bloomberg) -- The rise in U.S. worker productivity from October through December may have slowed from the previous three months as employees worked more hours and businesses boosted hiring to keep up with demand, a survey showed in advance of today's Labor Department statistics. The government's gauge of how much an employee produces for every hour worked may have climbed at a 2.5 percent annual rate in the fourth quarter, following a 9.4 percent increase from July through September, according to the median of 55 estimates in a Bloomberg News survey. The third-quarter rise was the biggest in two decades.
Companies added 144,000 workers to payrolls in the fourth quarter, the most in three years, suggesting businesses could no longer depend solely on efficiency gains to meet demand. Another Labor Department report today may show that new claims for unemployment insurance eased to 340,000 last week, almost matching a three-year low, a survey of economists showed. ``The biggest productivity gains have already been achieved,'' said Michael Moran, chief economist at Daiwa Securities America Inc., in New York. ``That is a good thing for the economy because it suggests we should see a pickup in job growth.'' The rise in productivity was enough to cause unit labor costs, or the amount paid for each unit of production, to fall for a third consecutive quarter, according to the survey. Expenses may have dropped 0.3 percent last quarter, following a 5.8 percent decrease in the previous three months, according to the survey median. The Labor Department is to issue the statistics on worker productivity and initial jobless claims at 8:30 a.m. in Washington.
Corporate Profits
Falling labor costs and rising sales are giving corporate profits a lift and may provide businesses with the means to boost hiring. Of companies in the Standard & Poor's 500 Index that have announced results, two-thirds have exceeded estimates. On average, analysts expect S&P 500 members' quarterly profits to rise by 26.3 percent, the fastest pace in more than a decade. ``Corporate profits are rising fast, and that normally is a predictor of companies' willingness to spend on both equipment and new hires,'' said Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston. ``We're getting the equipment purchases; now we just have to hope for the jobs.'' The economy grew at a 4 percent annual pace last quarter, helped by a 10 percent increase in business spending on equipment and software, the Commerce Department said last week. The rise in corporate investment followed a 17.6 percent gain in the previous quarter, the biggest in five years.
First Quarter
Growth will accelerate to a 4.4 percent annual pace this quarter, helping the world's largest economy expand 4.6 percent in 2004, according to the average estimate of economists surveyed by Blue Chip Economic Indicators last month. The growth rate would be the strongest since 1984. ``With more demand, there will be more jobs,'' said Frederic Poses, chief executive of American Standard Cos., the maker of Champion toilets and Trane air conditioners, in a televised interview with Bloomberg News last week. ``Ours will be a job recovery in the sense that, if we produce more products, whether it is bath and kitchen or commercial air conditioning, we'll need more people to produce'' those goods. Piscataway, New Jersey-based American Standard last week said that fourth-quarter earnings rose 15 percent as sales improved 13 percent.
Businesses may have added 175,000 workers to payrolls last month, the biggest increase since November 2000, according to the median estimate in Bloomberg News survey of 66 economists. The Labor Department's Friday jobs report may also show that unemployment held at a 15-month low of 5.7 percent, the survey found. The slowdown in productivity gains would bring last quarter's rise closer to the 2.8 percent annual average from 1996 to 2002, more than a percentage point above the 1.6 percent average of the previous 25 years. //www.bloomberg.com