Good News/Bad News: Tech Is Boosting ProductivityGood News/Bad News: Tech Is Boosting Productivity

Like all good tea-leaf substitutes, economic indicators released by the government Thursday presented an ambiguous picture of the future.

There was good news in the Labor Department's productivity report. From the second to the third quarter of 2002, non-farm business productivity increased at an annual rate of 4% when comparing the third calendar quarter with the second, and output increased 4.1%. According to the report, the hours employees put in inched up 0.1% on a seasonally adjusted rate. The three factors are combined to see the change in goods and services produced per hour.

New Labor Department numbers show that initial jobless claims for the week ended Nov. 2 dropped 20,000, going from 410,000 to 390,000 the week before. But the 4-week moving average for initial claims was essentially unchanged at 402,000.

Scott Brown, chief economist at Raymond James & Associates, warns that jobless claims aren't always reliable indicators. For example, they tend to get more volatile as the holidays approach.

Yet the productivity numbers, which are affected in part by the use of technology, don't bode well for the job market. "We're still seeing applications of new technologies," Brown says. For example, "a lot of firms are pushing people on the Internet. We're also seeing a huge productivity surge from cost-cutting efforts, with businesses trying to do more with less input. If productivity is strong, that means more job cuts."

Increased productivity at lower costs can set the stage for an improved business environment, but it's still unsettling for the near term, Brown says. The effects of unemployment can trickle down to consumer spending, something the Federal Reserve Board might have been anticipating with its half-percent interest-rate cut this week.