U.S. productivity rises. Why? by Sandra Stoklaskova

Productivity in the U.S. increased in the fourth quarter, after declining working hours. Employers did not want to raise a labor cost, so they decided for this solution. On the other hand it could have lingering impact on inflation at Federal Reserve, according to a report from Wednesday.Hourly output per worker in non-farming sector rose by 1.8 percent annual rate. This was much more than expected increase of this indicator by 0.4 percent, with unit labor costs. Labor Department report showed that unit labor costs grew only by groundless 2.1 percent.But economists are afraid of effect of these steps on interest rate. "By lessening inflation risks, this report may soothe opposition to interest rate cuts within the Federal Reserve," said Roger Kubarych, chief economist for UniCredit/Bayerische Hypo und Vereinsbank in New York.These data are affecting also bond prices, prices on stock market and overall situation on financial and other markets in U.S., which have been already weakened by happenings in housing sector.Despite the fact, economists are still proud on result they have achieved. "It is remarkable that U.S. companies were able to maintain productivity growth under the circumstances, but that was only because of their flexibility in trimming labor input," said Kubarych.Increasing of labor productivity is considered to be a long term trend, as in fourth quarter this indicator rose every year by 2.6 percent. On the other side, the level of long term productivity growth is slowing. Testimony to this is the decrease in averaged productivity over past years.

related story: http://news.yahoo.com/s/nm/20080206/bs_nm/usa_economy_productivity_dc;_ylt=ApKsdIYogmC8GsYXRJCF1sWs0NUE

by Sandra Stoklaskova for PocketNews (http://pocketnews.tv)

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Edited by: Katarina Bosanska