U.S. worker productivity increased a revised 2.2% in Q2, below the consensus estimate, as companies eliminated jobs without hurting output, the U.S. Labor Department announced Friday.

Economists surveyed by Bloomberg News had expected productivity to increase 2.7% in Q2. Productivity increased 2.6% in Q1. In the past 12 months, productivity is up 2.8%.

Productivity measures output per hour worked. Economists say rising productivity usually leads to increases in income, as businesses can increase salaries/wages paid without increasing their per unit costs.

Meanwhile, unit Q2 unit labor costs, a statistic adjusted for increases in efficiency, increased 1.3%. However, in the last 12 months labor costs have increased just 1.5%. Labor costs increased 2.2% and 4.7% in Q1 and in Q4 2007, respectively.

Economists surveyed by Bloomberg News had expected unit labor costs to increase 1.3% in Q2.

Q2 productivity takes some pressure off Fed

Economist Peter Dawson said the adequate Q2 2.2% productivity statistic, although below consensus, will provide argument support for doves on the U.S. Federal Reserve who want to keep interest rates as low as possible to encourage a U.S. economic recovery.

"Productivity is still rising at a healthy pace. That fact, combined will the relatively modest unit labor costs for the second quarter and year, present a picture that inflation is not getting out of control, which is good news for those seeking lower interest rates, and for business executives," Dawson said. "If these productivity and cost trends continue, hawks on the Fed are going to have a hard time making a case for an interest rate increase at the Fed's next meeting."

Just call it stagflation, updated for the globalization era.

Oil's record, 5-year rise, combined with increasing food costs, have increased inflation, reduced disposable income, and slowed the U.S. economy to a crawl, when combined with the effects of the end of the housing boom.

The above sounds like a prescription for a replay of the 1970s' stagflation era, but is it? Not quite, according to Stephen Cecchetti, professor of economics at the Brandeis University International Business School.

Cecchetti told Bloomberg News Thursday a more-flexible economy, with lower stockpiles of goods, increased fuel efficiency, increased worker productivity, and lower wage increases for employees are among the economic differences separating the 1970s and 2008 U.S. economies. As a result, Cecchetti doesn't see a repeat of the 1970s' high inflation/high unemployment levels.

Economist David H. Wang concurred with the above conclusion, but argued that the two major factors in the nation's enhanced ability to cope with large increases in commodity costs and other negative economic factors are energy efficiency and worker productivity.

U.S. worker productivity increased a revised 2.6% in Q1 2008, above the consensus estimate, as companies eliminated jobs without hurting output, the U.S. Labor Department announced Wednesday.

Economists surveyed by Bloomberg News had expected productivity to increase 2.5% in Q1 2008. Productivity increased 1.8% in Q4 2007.

Productivity measures output per hour worked. Economists say rising productivity usually leads to increases in income, as businesses can increase salaries/wages paid without increasing their per unit costs.

Meanwhile, unit Q1 2008 labor costs, a statistic adjusted for increases in efficiency, increased 2.2%. Labor costs increased 4.7% in Q4 2007.

Economists surveyed by Bloomberg News had expected unit labor costs to increase 1.9% in Q1 2008.

During Q1 2008, hours worked fell at a 1.8% annualized pace.

Economic Analysis: A strong productivity report. The nation's workforce continues to become more efficient, which is a good sign given increasing business costs in other areas -- raw materials, commodities, energy, and transportation costs, etc. As in 2007, for the first quarter of 2008, companies did a good job increasing productivity while containing employee costs amid sluggish business conditions.

The dollar rallied to a six-week high Wednesday after U.S. productivity increased at a larger-than-expected rate and sentiment surfaced that Europe's economy may have slowed considerably.

The dollar rose about 2 cents versus the euro -- a large move in the currency market -- to $1.5370 on Wednesday afternoon. The dollar also gained against the world's other major currencies, rising about 2 cents to $1.9530 versus the British poundת about 0.5 cents to $1.0555 versus the Swiss franc and about one-half yen to 104.85 yen versus Japan's yen.

U.S. productivity gives dollar a lift

Earlier in the day, the U.S. Labor Department announced that U.S. worker productivity increased at a 2.2% annual pace in Q1 2008, well above the 1.7% Bloomberg News survey consensus estimate.

Independent currency trader Andrew Resnick told BloggingStocks Wednesday the Q1 2008 productivity data, combined with a sense that the European Central Bank is behind-the-curve concerning interest rate cuts to deal with slowing economic growth, put traders in dollar-buy mode.

U.S. worker productivity increased at a 2.2% annual pace in Q1 2008, above the consensus estimate, as businesses cut both jobs and worker hours to contain costs, the U.S. Labor Department announced Wednesday.

Economists surveyed by Bloomberg News had expected productivity to increase 1.7% in Q1 2008. Productivity is now up 3.2% on a year-over-year basis.

Productivity increased 1.8% in 2007 and 1% in 2006. Productivity measures output per hour worked. Economist say rising productivity usually leads to increases in income, as businesses can increase salaries/wages paid without increasing their per unit costs.

Meanwhile, unit Q1 2008 labor costs, a statistic adjusted for increases in efficiency, increased to 2.2%, compared to a 2.8% increase in Q4 2007. Labor costs have risen just 0.2% on a year-over-year basis, the smallest increase since 2004. Labor costs increased 3.1% in 2007.

Economists surveyed by Bloomberg News had expected Q1 2008 labor costs to increase 2.2%.

Economist Peter Dawson liked the Q1 2008 productivity report, for the most part. "There is some concern about employers curtailing employee hours, but in general, the 2.2% increase in productivity is a healthy stat. U.S. workers are becoming more productive. It'll help businesses contain costs amid all other cost increases. It's a generally good report."

Economic Analysis: As Dawson noted, in general, a favorable Q1 2008 productivity report. The nation's workforce continues to become more-efficient, which is a good sign, given increasing business costs in other areas -- raw materials, commodities, energy and transportation costs, etc. Early in 2008, companies are containing employee costs, and increased productivity is contributing to this goal.

After recommending yesterday that our leaders should stimulate the economy by investing in infrastructure rather than mad money stimulus, and after discussing this with some business associates, I have a few more thoughts I'd like to share.

We have been hearing that 70% of our economy has been supported by the American consumer. Congress and the President have agreed on -- or colluded, depending on who you speak with -- a bi-partisan economic stimulus package. When, and if, the check arrives in the mail, there might be short-term glee among the populous. But if it is used just to stimulate more consumption, then it will only serve to postpone the pain by some time -- perhaps a month or two.

If I get anything back, I will be using it to reduce debt or invest in equity and nothing else. I hope my fellow citizens are able to understand that reducing debt or investing in equity has some value, while consuming, that is, rushing out to buy a flat-screen television or a new PlayStation, is a complete waste of a one-time opportunity.

U.S. worker productivity increased 1.9% in Q4 2007, above the consensus estimate, as businesses reduced employee hours to contain costs, the U.S. Labor Department announced Wednesday.

Analysts surveyed by Bloomberg News had expected productivity to increase 1.8% in Q4 2007. Productivity increased 6.9% in Q3 2007.

For 2007, productivity increased 1.8%, up from 1% in 2006. Productivity measures output per hour worked. Economists say rising productivity usually leads to increases in income, as businesses can increase salaries/wages without increasing their per unit costs.

Meanwhile, Q4 2007 unit labor costs, a statistic adjusted for increases in efficiency, were revised higher to 2.6% from the earlier 2.1%. Labor costs increased 3.1% in 2007.

During Q4 2007, hours worked fell 1.6%, the largest decline since Q1 2003, and the second consecutive quarterly drop.

Economic Analysis: In general, a decent Q4 2007 productivity report. The nation's workforce continues to become more-efficient, which is a good sign, given increasing business costs in other areas -- health care insurance, raw materials, commodities, energy and transportation costs, etc. In 2007, companies did an adequate job containing employee costs.

U.S. worker productivity increased more than forecast in Q4 2007, as businesses cut back employee hours at the fastest pace in about five years, the U.S. Labor Department announced, in a statement.

Productivity increased at an annualized rate of 1.8% in Q4 2007, well above the 0.5% consensus estimate. Productivity increased 6% in Q3 2007.

For 2007 productivity increased 1.6%, after rising 1% in 2006.

Unit labor costs increased 2.1% in Q4 2007 after declining 1.9% in Q3. Hours worked declined 1.5%. Compensation for each hour worked increased at an annualized rate of 3.9%. For 2007, labor costs increased 3.1%, the highest since 2000.

Asian manufacturers, especially those in China and Japan, are beginning to feel the pinch from weak purchasing power here in the United States. A report in the New York Times highlights some of the attitudes and adjustments which shall be guiding world industrial output going through this year and into 2009. Prudent cuts are being made by Asian manufacturers across the board to offset costs, while demand growth is in decline.

It's not all doom and gloom however, depending on how you look at it. Chinese economists are actually feeling a bit of a relief from the slowdown in the face of their own inflationary pressures and indications are that merchandise inventories aren't yet getting bloated. This means that while industrial output might be cooling in the near term, available manufacturing capacity should remain relatively flush while the banks figure out the details of stinging money supply issues.

There's an economic adage that says, "The economic cycle repeats itself, but never in quite the same way."

The current economic slowdown, at least initially, is providing evidence to confirm the above, as unlike the previous two slowdowns, corporations appear to be taking a more-cautious approach toward both eliminating and adding jobs.

During this cyclical downturn, many companies are adopting hiring freezes as they attempt to discern the likely direction for the U.S. economy in 2008 and beyond, The Wall Street Journal reported. (Subscription required.) Many economists expect the U.S. economy to register anemic growth in Q1 and Q2 2008 -- roughly 1.0-1.5% GDP growth, and the most recent monthly hiring total supports that prediction: the nation added fewer than 20,000 jobs in December 2007.

However, unlike the start of previous downturns in 2001,1990-1991, and 1981-1982, corporations have resisted -- at least so far -- major layoffs and operational cutbacks. Economist David H. Wang told BloggingStocks on Thursday that he believes two factors are behind the personnel balancing act.

U.S. non-farm productivity surged to an annualized rate of 6.3% in Q3, the strongest productivity gain in four years, the U.S. Labor Department announced Wednesday.

The revised statistic is a substantial increase from the preliminary 4.9% Q3 productivity increase announced by the department a month ago.

"All in all, it's a great productivity number for the quarter, which leads to a good annualized rate," economist David H. Wang told BloggingStocks Wednesday. "This will relieve some inflationary pressure in the economy, and also give the Federal Reserve some leeway regarding interest rates. The Fed can now see that labor is not adding that much to inflationary pressures in the U.S. economy."

Over the past 12 months non-farm business productivity has increased 2.7%, the largest four-quarter gain since late 2004. During Q3, manufacturing productivity increased 5%, while non-financial productivity gained 4.2%.

Economic Analysis: The high Q3 productivity stat is good news for the economy, employers, and employees. With high productivity, the U.S. economy can grow rapidly without inflation, easing pressure to raise prices. This simultaneously means worker productivity per hour is rising, which usually leads to raises, higher real incomes, and higher living standards. After registering productivity giants that averaged 2.5% per year for 1996-2005, productivity had slowed to about 1% in 2006. With the revised Q3 2007 stat, there's now additional evidence that productivity has resumed advancing at an impressive rate.

We were working together at a coffee shop yesterday afternoon, my friend and I, and suddenly we realized the sun was all too near the horizon. It was 3:30 p.m., and we both began to gather our things, ready to head home and make dinner, mourning summer -- when 3:30 would have been the hottest hour of the day. It was then that I broached my idea for a revolution in worldwide productivity: change the way the work week, works.

What if we were to work hours that fit how our bodies respond to the seasons: 6-hour days in the dark of winter; 10-hour days in the long, bright hours of summer? I never mind sitting at my computer until 6 or later in June, when I know that I can still garden for an hour after making supper for my kids; we can kick the ball around while we water. Not so in November, when I start thinking about bedtime at 4:30, wiping out my effectiveness for the rest of the day.

In a piece on the evolution of the weekend on (appropriately) Weekend America on NPR, Krissy Clark explains that it wasn't until the Industrial Revolution that people started becoming tied to the clock. Before then, you rose at sunrise to tend to the farm duties, starting dinner an hour before sunset and heading to bed shortly thereafter. There was no weekend, no alarm clock. The eight-to-five schedule is a thing for the convenience of the machines in a factory; not the people.

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.

Profits of the 500 largest companies in the U.S. are up 80% from 2000 to 2006 with revenue up just 39%. Why? U.S. productivity is growing 3.9% per annum, one of the highest productivity growth rates in the world.

Another interesting data point from Shlomo Maital in this weekend's Barron's editorial is that total capital formation is only 17% of GDP, with two-thirds of it reinvested in obsolete plant and equipment. With unemployment and investment in new capital formation so low, this could mean employees are in a strong position to demand higher wages.

Although Maital did not conclude this in the editorial, what the economic data suggest are that economists and other pundits calling for the collapse of the consumer -- and, ergo, the U.S. economy -- are simply way off. As the housing market collapses, this has more to do with the mortgage market and new home sales. Do not expect this to spill over completely into consumer spending. The growth in wages in this economic cycle to date has been muted, but do not expect that to last forever. High productivity and the supply-and-demand balance favoring the laborer will more than offset the impact of the mortgage market.

Nissan North America (NASDAQ: NSANY) is using better automation to streamline its automotive production. A move that may help the company's bottom line.

In pursuit of absolute manufacturing floor intelligence, Nissan North America is utilizing progressive automation technology to track and control the manufacture of full size vehicles in its new plant in Canton Mississippi. Motion System Design has reported that Nissan is utilizing readily available components from EMC (NYSE: EMC), Dell (NASDAQ: DELL), Microsoft (NASDAQ: MSFT) and GE Fanuc (NYSE: GE) to integrate Nissan's Canton operations starting from parts ordering and going right on through final assembly. GE Fanuc Cimplicity software is at the heart of Nissan's Production Management Control System (PMCS). GE Fanuc is a unit of GE Infrastructure.

The PMCS interchanges data with over 1 million individual data points within the manufacturing stream. Oversight is accomplished with a minimum of engineering staff by utilizing carefully planned and heavily integrated software over a span of more than 300 plant floor operating stations. Additionally, the system does double duty by keeping constant watch over energy consumption parameters and by monitoring waste destruction and removal. In all, the high tech system oversees the manufacture of 400,000 vehicles at peak production capacity within Nissan's Canton facility.

Read the Motion System Design article here.