Implications: Productivity came in stronger than expected in the first quarter, rising at a 1.6% annual rate, beating expectations that it would rise at a 1.1% rate. While productivity in Q1 was not as strong as in Q4, it's important to remember that when GDP growth slows (as it did in Q1), so does productivity growth. Hours worked came in at a healthy 1.4% annual rate in Q1, although real compensation per hour fell at a 2.5% rate. Oftentimes, once a recovery gets to the point where firms are vigorously increasing hours, the pace of productivity growth slows down. Productivity grew at a very rapid 6.7% rate in the year ending in the first quarter of 2010. In the past four quarters, productivity has grown at a 1.3% rate. On the manufacturing side, productivity continues to boom, despite companies increasing hours vigorously. Output increased at a 9.7% annual rate in Q1, the fastest pace in over 16 years. Productivity in the manufacturing sector is pushing down unit labor costs – how much companies have to pay workers per unit of production. In other news this morning, new claims for unemployment insurance increased 43,000 last week to 474,000. The Labor Department says a group of temporary factors lifted claims: a teacher holiday in New York, a new benefit program in Oregon, and auto shutdowns related to the disasters in Japan. Continuing claims increased 74,000 to 3.73 million. Also, chain store sales were reported late this morning and were up 8.5% versus as year ago, adding to evidence that next week's retail sales report will be strong.
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Posted on Thursday, May 5, 2011 @ 12:24 PM
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