Tuesday, August 07, 2007

End Of The Productivity "Miracle" ?

On normal days without a Fed meeting yesterdays productivity number would have gotten much more attention. Combined with the rising unit labour costs they were lousy. It looks like the "productivity" miracle is gone. This should come as no surprise (except maybe for Greenspan :-) when the goods producing part is making up for a smaller percentage year after year. And it is hard to see how in a service based economy the high productivity can sustain 2% or more. And the days when a faster computer etc would make a big difference are also gone....

An normalen Tagen ohne Fed Sitzung wäre die gestrige Produktivitätszahl und die Lohnstückkosten sicher nicht so untergegangen. Die waren enttäuschend. Es sieht immer mehr so aus als wenn das sog. "Produktivitätswunder" in den USA Ihren Zenit längst überschritten hat. Ausser Greenspan sollte es keinen überraschen das wenn die verarbeitenden Bereiche der Wirtschaft von Jahr zu Jahr schrumpfen es immer schwerer wird diese Dynamik aufrechtzuhalten. Wenn immer mehr auf Service und Dienstleistungen basiert wird es schwer die erwarteten 2% p.a. zu erzielen. Die Zeiten als ein schnellerer Computer gebracht hat sind wohl größtenteils vorbei.....

Aug. 7 (Bloomberg) -- U.S. worker productivity gained less than forecast in the second quarter and labor costs rose, suggesting inflation remained a risk as the Federal Reserve set interest rates today.
Productivity, a gauge of employee efficiency, advanced at an annual rate of 1.8 percent after a revised 0.7 percent gain in the previous three months, the Labor Department said today in Washington. A measure of wages and benefits increased at a 2.1 percent pace, more than anticipated, and climbed 4.5 percent in the 12 months ended in June.

The report may reinforce concern that the decade-long productivity surge that helped curb inflation and allowed former Fed Chairman Alan Greenspan to hold down rates is fading. Figures for the past three years were also revised to show productivity increases weren't as great as previously estimated.

The advance in first- quarter labor costs was revised up to a 3 percent pace from 1.8 percent and the increase in the 12 months ended June was the biggest since 2000.

Labor's revised numbers showed productivity rose 1 percent in 2006, down from a previously reported 1.6 percent gain. Labor costs, which account for about two-thirds of the cost of producing a good or service, rose 2.9 percent in 2006, down from a previous estimate of 3.3 percent.

Economists at UBS Securities LLC in Stamford, Connecticut, are among those who believe the slowdown in productivity and increase in labor costs will reduce corporate profits rather lead to higher prices.

> Looks like he could be right.....This chart shows the connection from the S&P 500 earnings vs the correlation from core PPI & unit labour costs (called "profitindicator" via the FTD). Compare this to the estimates from Wall Street finest. The reason for their optimism isn´t probably the earnings outlook .......The entire forecast is getting more dubios when you look at this chart that shows the percentage of financials vs total stcok market capitalisation.

> Sieht ganz so aus als wenn er Recht hat. Vergleicht den Chart mit den aktuellen Schätzungen der natürlich volkommen neutralen Wall Street Strategen. Der Grund für den Optimismus kann wohl kaum die Zuversicht in künftige Gewinne sein. Das gilt besonders dann nicht wenn man sich dazu noch diesen Chart ansieht
thanks to Bespoke

Productivity at non-financial corporations, a measure watched by the Fed, rose at a 0.2 percent rate in the first quarter.

Productivity rose 2.8 percent a year on average from 1996 to 2005, almost twice the 1.5 percent average gain per year in the previous two decades. Worker efficiency rose 1.6 percent last year.
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