America's Healthy Slowdown

Latest report on productivity has good news -- with a catch

By Frank Pellegrini Tuesday, Nov. 10, 1998
    • WASHINGTON: If anyone was still worried about inflation, this would be great news: Overall U.S. productivity rose 2.3 percent in the July-September third quarter, the Labor Department said Tuesday. Productivity gains mean bigger volume, which means companies can pay workers more and still turn profits without raising prices. But the inflation watch is off and the recession watch is on, and within Tuesday's good news was a warning: In some sectors, the boost is coming from a lack of work .

    "When companies are worried about the future, one of the first things they do is ratchet down hours," says TIME senior editor William Saporito. "It's the one variable cost you can control." But overall, Saporito rates the report "pretty strong." A meaty productivity gain is never a bad thing -- it should promote GDP growth in the long term. But those predicting a recession this spring could still be right.