The Other Squeeze

Credit isn’t the only thing being squeezed these days. So is labor compensation. From today’s International Herald Tribune:

International Herald Tribune

U.S. productivity rises by more than expected

Bloomberg News
Wednesday, December 3, 2008

WASHINGTON: U.S. worker efficiency rose more than forecast in the third quarter and labor costs increased less than anticipated, a report showed Wednesday, signaling company efforts to rebuild profits are paying off.

Productivity, a measure of employee output per hour, rose at a 1.3 percent annual rate, compared with a 1.1 percent gain estimated last month, revised figures from the Labor Department showed. Labor costs climbed at a 2.8 percent rate, less than the 3.6 percent pace forecast.

Companies reduced expenses as the economy contracted by reducing employee hours at the fastest pace in six years. The drop in raw-material prices combined with the smaller-than- expected increase in labor costs indicates companies are moving to shore up profits as the economy heads for what may be the longest recession in seven decades.

“Businesses have been more proactive in their response to weakening growth, cutting labor quickly in response to weaker demand, as they attempt to preserve profitability,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report.

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