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Productivity of U.S. Workers Rises More Than Forecast (Update2)
By Shobhana Chandra


May 6 (Bloomberg) -- The productivity of U.S. workers rose in the first quarter more than forecast, signaling employers will take time to boost payrolls in order to contain costs.

The measure of employee output per hour climbed at a 3.6 percent annual rate, Labor Department figures showed today in Washington. Efficiency advanced 6.3 percent over the past four quarters, the biggest 12-month increase since 1962. Labor costs fell more than projected.

Employment may improve as companies such as Timken Co., which slashed payrolls and relied on becoming more efficient to lower expenses and protect profits during the recession, now look to expand as sales improve. The drop in labor costs is also helping limit inflation, giving Federal Reserve policy makers room to keep interest rates near zero.

‘Companies are still using productivity growth and cost- cutting as a major part of their business plan,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “They are still being very slow to bring back people. Labor costs won’t be an issue.”

Economists projected productivity would rise at a 2.6 percent annual pace, according to the median of 64 forecasts in a Bloomberg News survey. Estimates ranged from gains of 1.5 percent to 3.9 percent. The Labor Department revised the fourth- quarter gain in efficiency down to a 6.3 percent rate from a previously estimated 6.9 percent. .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=afyws0sSxu7c&pos=3