Productivity Growth Slows Sharply

Discussion in 'Trading' started by S2007S, Dec 5, 2006.

  1. S2007S


    another "positive" for stocks...

    Productivity Growth Slows Sharply
    Tuesday December 5, 8:35 am ET
    By Martin Crutsinger, AP Economics Writer
    Productivity Growth Slows Sharply While Labor Costs Moderate

    WASHINGTON (AP) -- Growth in worker productivity slowed sharply in the summer while wages and benefits rose at a rate that was far below a previous estimate.

    Productivity, the key ingredient to rising living standards, edged up at an 0.2 percent annual rate in the July-September quarter. That was better than the zero change that was first reported, but it was below analysts' expectation for a slightly stronger 0.5 percent increase.

    click here
    The costs of wages and benefits per unit of output increased at an annual rate of 2.3 percent in the summer, a much slower advance than the 3.8 percent rate of increase first reported a month ago. The slower gain in unit labor costs was likely to be greeted with relief at the Federal Reserve, which is concerned that wage pressures could boost inflation.

    The 0.2 percent growth rate for productivity followed a much stronger 1.2 percent increase in the spring and was the weakest performance since a 0.1 percent decline in productivity growth in the final three months of last year, a time when the economy was being buffeted by the effects of a string of Gulf Coast hurricanes.

    The 2.3 percent increase in labor costs followed a 2.4 percent plunge in the second quarter and a 9 percent surge in the first quarter this year. The quarterly changes have been skewed by the payment of large bonuses at the beginning of the year.

    While rising wages are good news for workers, the increases could fuel unwanted inflation when productivity, the amount of output per hour of work, is slowing sharply.

    Increases in productivity are the key factor pushing living standards higher because they mean that businesses can pay their workers more because of the increased output without having to raise the price of their products.

    However, if labor costs outpace the rise in productivity, it means that businesses either have to raise the cost of their products, which can push inflation higher, or trim profit margins.
  2. S2007S


    wait till 10am

    Dec 5 10:00 AM Factory Orders Oct - -4.2% -4.0% 2.1% -
    Dec 5 10:00 AM ISM Services Nov - 55.0 55.5 57.1
  3. slowing growth is sooooo bullish !!!

    I love 100% up room to go!!
  4. Productivity growth means nothing

    I consider myself to be a productive person regardless of some indicator

    Anyway all incdicies are green

    Time 2 buy more shares

    slow growth is good growth =more potential
  5. Man everything is perfect, this is the land of perfect, were every economic report is just perfect. The Fed voices is concerns, and presto the economic data says have no worry fed officials.

    Yes its just about perfect, no need to worry at all up up and away.
  6. March futures contracts show big gap up when they roll over.
  7. It's The Productivity Stupid! In the 1990's big gains in corporate efficiency brought on by high tech spending & global trade was THE key factor in holding down inflation. You don't hear much about worker productivity lately from the Fed whereas Greenspan used to talk about it all the time. Why no mention from Big Ben? Well because the news is not very good.

    In 2003 we reached a PEAK rate of 4% productivity growth As of the third quarter we were down to 1.9%. This takes a little time to work it's way through the economy but it's the slowest rate in 9 years! Productivity slow down means the economy has less room to grow without generating inflation, this is showing up in the labor market that continues to TIGHTEN even as economic growth SLOWS. The result labor costs are spiking. And just at a time when most companies productivity gains are to weak to offset a pay raise to the workforce. October hourly pay was up a whopping 4% from the year before. Today I think they revised some of that slightly lower but the trend in wages is UP.

    The Fed then is in a bind. As economic activity reaccelerates after the midyear cycle slowdown the labor markets will tighten further-- Quite simply running at absolute employment is BAD for inflation. So whereas commodity-based inflation and oil has retreated somewhat and that has caused inflation to appear to have peaked - the end result may be quite a bit more inflation than the Fed can be comfortable with. Big Ben will have to continue his rate raising cycle and that will put us in a risk of recession in mid to late 2007. Now why can't the bond market figure that out?~stoney
  8. dhpar


    excellently said. I couldn't write down my thoughts better than this...:cool:

    By the way, and coincidentally :), there was a new research report on productivity from one of the Feds saying that going forward all is going to be rosy. I will not hold my breath.