Productivity Rising

9/23/2013


Productivity is more than a buzzword. For businesses, the struggle to boost productivity has long been a way of life.

On an inflation-adjusted basis, the per-hour output of U.S. nonfarm businesses has risen at least 2.3% every year since the government started tracking it in 2003. In the June quarter, productivity was up 1.2% from the end of 2012 and 1.5% from a year ago.

Such productivity gains shouldn't surprise us. The U.S. economy as a whole has increased in efficiency for most of the last 66 years. We measured total U.S. economic activity (gross domestic product) per nonfarm employee. While June productivity of $115,000 per employee is roughly flat with year-earlier levels, GDP per employee has risen at an average rate of 1.5% year over year since 1947, adjusted for inflation. Not surprisingly, productivity tended to improve more during periods when payrolls shrank, averaging growth of 1.8%. But even when payrolls increased, GDP per employee rose an average of 1.4% a year.

In June, GDP per employee fell 0.1% year over year. But such declines have occurred in only 14% of the last 785 months. The Blue Chip Economic Indicators consensus projects GDP growth of 2.4% in the second half of 2013 and 2.6% in 2014. Payrolls have risen 1.7% over the past year, and even if the pace of hiring picks up, GDP per employee should rise.

Of course, an efficient economy won't translate to gains for every company. So we screened for recommended stocks capable of improving their productivity even as they hire.

STOCKS WITH RISING PRODUCTIVITY
The 11 recommended stocks below have increased their payrolls over the last one and three years, along the way growing sales per employee at least 3% a year. All employment data is based on the company's most recent fiscal year.
-- Sales Per Employee (Thousands) --
Company (Price; Ticker)
Employees, Last
Fiscal Year
(Thousands)
Last
Year
($)
Previous
Year
($)
3 Years
Ago
($)
Aflac ($62; AFL)
9
2,829
2,589
2,263
American Express ($77; AXP)
64
532
517
455
Apple ($455; AAPL)
76
2,057
1,710
1,166
Celgene ($147; CELG)
5
1,172
1,086
956
Cigna ($84; CI)
36
813
701
628
Cognizant Tech. ($81; CTSH)
157
47
44
42
Comcast ($44; CMCSa)
129
485
443
334
Continental Res. ($101; CLR)
1
3,416
2,709
1,535
Foot Locker ($33; FL)
41
152
144
125
Qualcomm ($69; QCOM)
27
719
687
647
Union Pacific ($157; UNP)
46
456
436
325

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