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Productivity rises at best rate since '86

The productivity of American companies rose in last year's fourth quarter by the largest amount in more than seven years, the Labor Department reported Tuesday.

But for all the talk of America's newly achieved competitiveness, the new numbers failed to show that corporate America has regained its old efficiency, the department said.

Productivity _ that is, the quantity of goods and services that the nation's workers produce in a given hour _ rose at an annual rate of 6.1 percent in the fourth quarter.

That rise, covering all business except farming, was the best showing since the first quarter of 1986, when productivity rose by 6.9 percent. Most of last quarter's gain was in manufacturing, where productivity advanced by a very strong 7.2 percent.

The latest productivity figure, which is a sharp revision from the previous estimate of 4.2 percent, renewed a debate that flares up whenever the Labor Department releases productivity figures.

On one side are those who argue that American business, and particularly manufacturing, has finally returned to the high levels of productivity growth that prevailed until 1973.

As a result, they say, American companies are now as competitive as German and Japanese companies. That view has been invoked frequently by companies to justify the layoffs of thousands of workers considered a drag on efficiency.

"There have been 60,000 layoffs in telecommunications alone this year," said Stephen S. Roach, senior economist at Morgan Stanley & Co. "That is not job shifting; that is upheaval. We have become far more productive and cost-efficient than we were in the past."

The Clinton administration has resisted this view. Most of the fourth-quarter gain reflected the improving economy rather than greater corporate efficiency, according to Edwin Dean, chief of the productivity division at the Labor Department's Bureau of Labor Statistics.

"I would be conservative and take the position that we have not really changed that much; we have not become all that more efficient," Dean said. "One can explain a lot of this improvement by noting that there was slack in the system as a result of the recession, and as the economy has recovered, the slack has been used up. People have simply worked harder to fill all the orders, and so their productivity has risen."

Some of the figures released Tuesday support Dean's argument. What the work force produced to satisfy the rising national demand increased by 9.3 percent, for example, while total hours worked went up by only 2.2 percent _ the implication being that people worked harder within their scheduled hours. Much of the additional output was sold abroad.