"U.S. nonfarm productivity rose more than expected in the second quarter as companies expanded output but only modestly increased the hours worked by their employees, data from the Labor Department showed on Wednesday."
"Productivity climbed at a faster-than-expected 1.6 percent annual rate between April and June.
The still-modest reading could be a sign that companies will have to step up hiring to keep up with production, said Jeremy Lawson, an economist at BNP Paribas in New York. "
So this might mean that for companies to increase productivity, they will actually have to hire more people, God forbid.
"The pace of productivity growth is relatively soft at the moment. It's hard to add production on a faster pace without adding more workers," he said.
Some interesting revising of previous numbers:
"Using several years of recently revised data on economic growth, the government also said productivity did not rise quite as much as initially thought in 2010. Employers slashed payrolls during the 2007-09 recession, helping fuel a temporary spike in productivity. The increase faded last year."
"The Labor Department report also showed unit labor costs climbing 1.7 percent during the period, a faster pace than the 0.6 percent gain expected by economists polled by Reuters."
What we have seen lately are some signs that corporate profits are slipping now-WOJ, I think among others has talked about this.
Part of the increase in productivity then was through cuts in hiring. Now, maybe, to come back in productivity and profits companies may have to hire? It's an optimistic scenario but it's certainly possible
Obviously I would like to see an increase in hiring, however I think the sharp rise in unit labor costs greatly dampen those hopes. The rise in costs suggests margins are already being squeezed. Absent a surge in demand, which has been notably missing this year, I actually think firms may look to cut jobs/costs in order to protect profits. (For Obama's sake though, labor participation continues to decline which makes a rise in unemployment unlikely.)
ReplyDeleteSeparately, earlier today I saw that (ex-financials) S&P 500 earnings are down 1.6% this quarter and expected to show similar results in Q3. Expectations for Q4 and 2013 remain far too high. Markets have been ignoring this data recently due to macro news, but I wonder how long that will last. If earnings for 2012 ultimately come in below 2011, will markets participants still be willing to increase multiples?