Implications: As expected, the revision to Q2 productivity showed a bigger drop than previously reported. This is a natural consequence of the downward revision to real GDP growth that came out last week. Less output means less output per hour. While some pessimists may worry that productivity has stalled, we look at it as a temporary pause in an upward trend. In the past three quarters, productivity has grown at a 2.6% annual rate despite the fact that hours worked have increased in each of those quarters. Even as output rebounds, technology will continue to boom and push producitivty higher, allowing workers to do more. Productivity in the past year has accelerated to a 3.7% annual rate from a 2.5% rate the year before. Unit labor costs – how much companies have to pay workers per unit of production – are down 2.8% in the past year, which means it is more profitable for companies to expand operations and boost hours worked. In the manufacturing sector, productivity grew 4.1% at an annual rate in Q2 while durable manufacturing productivity rose at an astounding 9.9% rate.
In other news this morning, new claims for unemployment insurance declined 6,000 last week to 472,000. Not seasonally adjusted, claims fell to 379,000, the lowest since before the collapse of Lehman Brothers in September 2008. Continuing claims for regular state benefits declined 23,000 to 4.46 million. Cars and light trucks were sold at an 11.5 million annual rate in August, unchanged from July and matching consensus expectations.
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Posted on Thursday, September 2, 2010 @ 9:32 AM
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