Companies squeeze more output from workers

Productivity in the United States surged in the fourth quarter, and factories received more orders in December than anticipated, showing companies are keeping payrolls lean to rebuild profits.

Employee output per hour rose at a 6.2 percent annual rate at the end of 2009, capping the biggest annual gain in six years, the Labor Department said yesterday in Washington. Factory bookings climbed 1 percent for a second month.

Efficiency in the last nine months of 2009 soared at the fastest pace since 1966 as companies slashed worker hours even after sales stabilized, a feat that may be difficult to sustain much longer as demand continues to grow. The gains cut labor expenses, helping curb inflation and giving the Federal Reserve room to keep the benchmark lending rate near zero.

"Firms are squeezing existing workforces to their limits," said Zach Pandl, an economist at Nomura Securities International Inc. in New York. "Cost pressures are negligible. We still think we're on the cusp of a hiring recovery," he said, although it "has been a little slower than we had hoped."

Economists had forecast productivity would rise at a 6.5 percent annual pace, according to the median of 65 forecasts in a Bloomberg News survey.

For all of 2009, productivity increased 2.9 percent, the biggest gain since 2003. Labor expenses declined 0.9 percent, the most since 2002. The increase in factory orders in December - bookings increased 1.2 percent, excluding transportation - was the fourth in a row.

- Bloomberg News