These days, most investors, executives, and economists know that there's no shortage of unpleasant news regarding the U.S. economy.

Moreover, some days it's hard to find those bright spots that we know exist amid the the snow storm of the recession. Here's one: U.S. worker productivity.

Underscoring that while there are no positives to job layoffs -- each job loss is a tragedy -- citizens and investors can at least point to the fact that the U.S. workforce is becoming more productive, and corporate efficiency is improving.

There has been much made of how well United Auto Workers (UAW) members are paid. One figure often used is $73 an hour. And it's also claimed that this pay level puts the U.S. auto manufacturers at a big competitive disadvantage. But that number is inflated and labor costs are not even that important a reason for the loss of U.S. auto market share. The real problem is that U.S. automobiles sell for a lower price but their quality is relatively poor, so consumers prefer the more expensive Japanese models.

The auto industry has used the $73 an hour figure in discussions about its UAW negotiations. But the New York Times points out that this number includes three things that don't all belong together -- wages, overtime, and vacation pay ($40/hour), health care and pension benefits ($15/hour), and retiree pension benefits ($15). That last thing does not belong because it's a fixed cost. If you compare the salary and benefits of a UAW worker to those of a Japanese one who gets less generous benefits, the numbers are much closer -- UAW ($55) vs. Japanese workers ($45).

The more important numbers are the ones that help explain why the U.S. auto manufacturers have lost so much market share and are now at death's door. Labor costs account for 10% of the cost to produce a U.S. vehicle so cutting UAW pay to $45 an hour would not make much of a difference. That's because U.S. labor costs are a mere $800 per vehicle higher than Japanese ones -- yet the typical U.S. vehicle sells for $2,500 less than the comparable Japanese model.

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."

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.

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.

Members of the United Auto Workers union are voting today on a proposed contract with Delphi Corp. (OTC:DPHIQ), the spun-off supplier to General Motors (NYSE:GM), which includes a compensation package that would drop their hourly wage for employees with seniority by $10 or more. New hires already start at a much lower pay scale, and many older workers have already taken buyout offers.

The offer, a product of long and bitter negotiations, illustrates the bind U.S. manufacturers find themselves in attempting to compete with foreign sources. According to the U.S. Bureau of Labor Statistics, the hourly production worker in the U.S. averages $23.65, while those in Brazil work for $4.09, Mexico $2.63, Taiwan $6.38, and Poland $4.54. While the Bureau did not include costs for mainland China, which certainly undercuts even these low-cost providers.

Given the staggering difference in labor costs, even these concessions might not be enough to safeguard Delphi jobs. While the Union successfully fought to keep open more plants than Delphi wished to, the company still plans to sell or shutter a number of its locations.

Although this pact only applies to 17,000 Delphi employees, it is being watched carefully as a possible template for upcoming negotiations between the big three car makers and the UAW. Included in the offer were a number of benefits such as yearly bonuses to ease the transition to a more competitive wage structure. The agreement won't effect GM's estimated $7 billion obligation to Delphi and its employees, though.

The question is, are these concessions enough to buoy Delphi? Are the guarantees they give to the workers affordable? The line of dominoes stretches all the way from the Chinese laborer working for peanuts right up to GM stockholders, and knocking this one over is bound to cause others to tremble.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

David Fried, editor of the Buyback Letter, chose Big Lots Inc. (NYSE: BIG) as his favorite stock for 2007, which rose 39% as of 6/1/07. Please see his original recommendation and his current opinion on Big Lots.

Fried's new pick is SkyWest, Inc. (NASDAQ: SKYW). He explains, "SkyWest, the nation's largest independently owned regional airline, is a contract carrier for United Airlines, Delta Air Lines and, most recently, Midwest Airlines.

"Nimbler than the big legacy carriers and not burdened by their bloated labor costs, SkyWest has a steady earnings stream, good cash flow, and an attractive P/E of 11. Its reputation as an efficient, low-cost operator and as the best-managed regional airline in the business was enhanced with the 2005 acquisition of Atlantic Southeast Airlines, which made SkyWest a player on the national stage.

"Since the mid-1970s, SkyWest has grown from a company with annual revenue of under $1 million to a publicly held company with annual revenues of more than $1 billion and almost 15,000 employees. SkyWest is set for continued long-term growth.