The dollar, it seems, can't stop falling; oil, on the other hand, can't stop rising (let alone decline a little); General Motors (NYSE: GM) is taking a $39 billion charge; there's talk that Morgan Stanley (NYSE: MS) may take an as-yet undetermined (oh no) charge related to subprime debt, and the housing market remains sluggish, nationally, to put it diplomatically. Other than that, to cite a famous line by Groucho Marx, things are fine.
Still, you may be wondering, "Is there any good news out there, financially-speaking?"
Indeed there is: The U.S. Labor Department announced Wednesday that U.S. non-farm productivity surged to an annualized rate of 4.9% in the third quarter -- the largest increase in productivity in four years -- and well above Wall Street's consensus of about 3.5%-3.7% productivity growth.
Further, the Labor Department said that during the past four quarters, non-farm productivity has increased 2.4%, the largest four-quarter growth since early 2005.
Productivity gains are important because they enable increased output per worker-hour, without increased cost. The gain also enables the economy to grow faster without inflation, which typically translates into increased living standards, as well as larger raises for employees. In general, it's easier for a company to grant higher raises (and award/enhance other benefits) if productivity-per-employee is rising at a high rate, than at a low rate, all other factors being equal.
In addition, as noted, productivity gains also help mitigate economy-wide inflation pressures. Increased productivity suggests that labor costs per unit will be lower, which typically helps counteract a company's other operating expense increases that may compel the business to increase prices -- and that's a major reason the U.S. Federal Reserve closely monitors productivity statistics.
Fed Analysis: Wednesday's Q3 productivity statistic most likely will be interpreted as "very welcomed news" by the Fed. With both oil price increases and related commodity price increases driving up consumer and producer prices, the high productivity stat will remove some inflationary pressures in the U.S. economy and provide more leeway for the Fed to maintain its current monetary policy without fear of rising inflation.
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Reader Comments (Page 1 of 1)
11-07-2007 @ 3:37PM
Po Campo said...
Bullshit
11-07-2007 @ 5:56PM
Richard said...
There are two parts to this story. One, the market sliding and two, productivity rising.
The first one, the market down 380 points, is just another manifestation of the schizoid nature of the volatility driving it plus the inevitability of the foxes raiding the henhouses.
Yesterday, all was rosy as the market went up 117 points. The reason given? Investors snatching up bargains. Well, what better way to get the "bargains" than by manipulating the market (read insider trading), forcing it down just so the totally unregulated Ponzi Scheme and hedge fund boys can use their fraudulent schemes to rip off common investors who are not privy to the extortionists' practices.
Today was a "sell" day, meaning that once the market manipulators met the desirable triggers and indexes it was time to cash in. Pump 'em up, then clean 'em out! Poof! there goes your pension sucker. Anyone remember Amaranth? Uh, forget it with the 10-second attention span MTV generation running the show.
Tomorrow most likely will be a "buy" day, which means there may be more bargain stocks to snap up with such a big sell-off today. Do we hear "Market up 300 points?"
It's sort of like the Wal-Mart syndrome where you "sell for less" when in fact the lower price is actually far higher than it was say, 6 weeks ago. Some stocks only appear to be bargains for the chumps who clearly aren't controling the whole monopoly game like those who know exactly which stocks to buy or sell.
As for productivity going up that's nothing new. All the labor statistics point to productivity going up because of massive layoffs in the auto industry and other well-paying manufacturing jobs while those remaining workers are toiling longer hours to produce the same or more widgets.
They work longer because if they don't they'll lose their jobs and be replaced by workers waiting in line to take their jobs, usually for less pay, plus the threat of their jobs being outsourced to India or China where wages are less than a quarter what they are in the U.S.
Well, we know what it's like in the real world when ordinary working Americans are faced with rising costs of heating oil this winter plus the jump in transportation costs and rising food prices as inflation raises its ugly head.
When electricity and gasoline prices rise along with oil prices due to artificial and false claims of low supplies and inventories, that's the time when the Ponzi Scheme boys on Wall Street can squeal with delight as they watch the common folks freeze to death in the dark. What a hoot!