WASHINGTON -- The Clinton administration may be raising false hopes when officials say better wages are on the horizon for the nation's workers.

The first official to sound the trumpet was Labor Secretary Robert Reich, when he briefed White House reporters after the government issued a strong employment report showing the civilian jobless rate held steady at 6% in June.

Mr. Reich pointed out that since President Clinton took office, more than 3.8 million jobs have been created. But then he went on to say that with the jobless recovery of the Bush years behind us and workers getting hired once again, things will soon get even better.

"Sometime in the future, we'll see wages start moving upward," Mr. Reich said. "I think, given productivity improvements that we've seen over the past year, there is plenty of room for wage improvements without worrying about inflation."

Laura D'Andrea Tyson, head of the President's Council of Economic Advisers, made similar comments in an interview that appeared in The Wall Street Journal.

It is nice to think that as businesses rack up gains in productivity - meaning they get more output per hour worked - they will be passing out fatter paychecks.

Mr. Reich bragged that first-quarter productivity was up 2.6% from the same period a year earlier. That is true, but the official productivity figures bounce around a lot. Second-quarter productivity probably fell because output did not keep up with a huge rise in hours worked.

Soft Statistics

Moreover, while economists say it is relatively easy to measure what manufacturers and farmers produce, output by the vast services sector - which accounts for most U.S. jobs - is much harder to calculate. Services of doctors and insurance salesmen are not as easily added up as auto tires in. Akron.

"The issue is whether the recovery in productivity in the last 18 months is simply a normal cyclical bounce or part of a long-term improvement," said Erich Heinemann, chief economist for Ladenburg, Thalmann & Co. "There is no evidence that productivity in the private service sector is improving."

U.S. productivity increased on average 1.1% a year since 1973, said Mr. Heinemann. "I challenge people who argue that there is this huge pot of productivity gold out there."

One-Time Gains?

In recent testimony to Congress, Fed Chairman Alan Greenspan said he was impressed by the gains in productivity that many companies have achieved by learning to get the most out of their computers and by taking advantage of better software. But this could be a one-time gain that will not go on indefinitely, he cautioned.

And businesses are not giving out any signals that they will be getting more generous with pay increases in today's bottom-line culture. According to the Conference Board, a New York-based business research group, companies are budgeting 4% for salary increases in 1995. That is the smallest increase since the group began keeping track 20 years ago.

Mr. Heinemann said real after-tax income per worker rose a measly 0.7% per year in the period from 1973 to 1993, a noticeable drop from 2.4% annual gain that occurred from 1948 to 1972. In each of the last two years of the Clinton recovery, after-tax income rose an uninspiring 1%.

In any case, the Clinton administration's latest economic forecast does not hold out the promise of a booming expansion next year or the year after. It calls for growth to slow over the next few years, with a few more nudges by the Fed to raise short-term interest rates.

The Bond Buyer is a sister publication of the American Banker.

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