Plus: Productivity Increases, Unemployment Falls and Eurozone Manufacturing Recovery Broadens.

Worker Productivity Continues to Rise
Worker productivity in the United States’ non-farm sector increased at a 2.6 percent annual rate through the fourth quarter of 2010, reflecting a 4 percent jump in output and a 1.4 percent boost in the average number of hours worked, the U.S. Department of Labor reported last week. In 2010 as a whole, annual average productivity rose by 3.9 percent, the highest rate since 2002.

The manufacturing sector posted major gains, with productivity rising 5.9 percent in Q4. Output climbed 4.4 percent, while hours worked decreased 1.4 percent. Over the last four quarters, manufacturing productivity rose 4.2 percent due to output increasing much faster than hours worked. Unit labor costs, which measure the cost of labor needed to produce one unit of output, fell at a 2.7 percent annual rate in Q4 and 2.7 percent over the previous four quarters.

“When workers produce more in the same amount of time, companies can increase their pay and still make the same amount of profit or higher,” MarketWatch explains. “In recent quarters, however, productivity gains have mostly stemmed from a big decline in the size of the American workforce during the 2007-2009 recession. In the fourth quarter of 2010, for example, the U.S. economy generated the same output as it did three years ago even though there were 7 million fewer workers.”

Despite the gains through the end of 2010, productivity growth may slow down in 2011 as employers reach the limit of how much output can be yielded by the existing workforce without making new hires. In fact, many are hoping for a decrease in productivity in the future, as that may benefit job growth.

“Normally, a slowdown in productivity would be considered bad for the economy. But the two-year surge came at the expense of many workers,” the Associated Press reports. “Companies shed 8 million jobs during the recession and the economy now needs job growth, even at the expense of worker productivity, economists say.”

Unemployment Falls Below 9 Percent
The national unemployment rate in the U.S. fell to 8.9 percent in February from 9 percent in January, marking the third consecutive month of decline and the lowest jobless rate since April 2009, according to the U.S. Department of Labor on Friday. The private sector added 192,000 jobs last month, up from a revised 63,000 in January.

The latest job figures appear to provide evidence for a recovery in the employment market and are raising optimism that hiring is finally beginning to catch up with other segments of the economy.

“While the job numbers received a boost from people returning to work after being marooned at home during the January snowstorms, economists and executives see the new data as confirmation of an underlying trend that had been visible anecdotally and in various other surveys: Private employers are gaining confidence and beginning to hire,” the Washington Post reports.

In February, manufacturing added 33,000 new jobs, with almost all of the gains in the durable goods industries. Since hitting a low point in December 2009, manufacturing has added 195,000 jobs. Construction employment also increased by 33,000 jobs last month, following a decline of 22,000 in January.

“February’s job growth will provide U.S. consumers with a much-needed income boost, but possibly not enough to offset the pain of rising energy prices,” the Wall Street Journal warns. “Climbing commodity costs and uncertainty about the outlook for consumer spending have some employers wary of ramping up hiring.”

In a separate report last week, the Labor Dept. said that weekly initial jobless claims had fallen by 20,000 in the week ending Feb. 26, bringing total jobless claims to 368,000, the lowest weekly level in nearly three years. The four-week moving average fell 12,750 to 388,500, the lowest level since July 2008.

Eurozone Manufacturing Recovery Broadens
The Eurozone’s manufacturing sector expanded at its fastest pace in nearly a decade last month, according to a new survey. The Markit Final Eurozone Manufacturing Purchasing Managers’ Index (PMI), which records manufacturing activity across all the major euro-area economies, rose to 59.0 in February, “confirming the pace of growth as the fastest since June 2000.” However, prices rose at their quickest rate in at least 14 years.

The PMI climbed in almost every country covered by the survey. Germany, Austria and the Netherlands led the growth, with PMIs for each hitting a record high. The French PMI rose slightly in February, although the expansion rate remained below the highs seen at the end of 2010, and the “peripheral” nations of Italy, Ireland and Spain exhibited improvements. Greece’s PMI was the only one to signal contraction.

Manufacturing production in the Eurozone rose at a near-record pace for the survey that was also the fastest since June 2000, while growth of new orders accelerated to the second-highest seen in the past 10-1/2 years.

However, the rapid expansion is coming at a cost, as inflationary pressures surged higher in February, with rates of increase in output prices and input costs both hitting series record peaks.

“Faster output growth is also generating more jobs at a near-record rate for the survey, but a less welcome by-product is greater price pressures,” Chris Williamson, chief economist at Markit, said. “Steep increases in raw material prices may deter firms from recruiting, or drive selling prices even higher in order to protect margins. The recent uptick in oil prices will only add to firms’ cost pressures.”

M&A Deals Grow in Packaging Industry
Merger and acquisition (M&A) activity in the North American and global packaging industry continues to show signs of growth, according to a new study from BMO Capital Markets Packaging Group.

In its sixth annual report, Mergers and Acquisitions in the Packaging Industry: 2010 Annual Deal Review, the financial services provider examines M&A trends in the packaging industry over the last several years. Among the highlights of this year’s study:

• Global deal volume increased 35 percent from 2009 levels to 227 packaging transactions;
• M&A activity strengthened across all regions of the world, with North American activity increasing 18 percent to 79 transactions;
• Strategic acquirers accounted for most global M&A activity, with 63 percent of 2010 deal volume; and
• Private equity acquirers accounted for most North American M&A activity, with 58 percent of 2010 deal volume.

“The challenging conditions that plagued the M&A market in 2008 and 2009 began to improve in 2010,” Doug Lawson, managing director and head of the BMO Capital Markets Packaging Group, said in an announcement of the report. “Both strategic and financial buyers began to resume acquisition activity in 2010 and are expected to remain active in 2011, as a result of improving conditions in the overall economy and the credit markets.”