Seesaw: Productivity Gains and More Unemployment

Jobless Claims

Initial jobless claims were higher than expected for the last week of January, rising an additional 8,000 claims from the prior week, with the prior week also revised 2,000 claims higher to 472,000.

Productivity

In a separate, preliminary report from the Department of Labor, nonfarm productivity also rose for Q409, surging 7.0 percent (seasonally adjusted) in the last quarter, while labor costs declined. Unit labor costs dropped an annualized 4.4 percent in the fourth quarter, following a revised 1.5 percent dip the prior quarter. Unit Labor Costs measure what it costs firms to pay workers for a single unit of output they produce.

From the WSJ:

“Overall, productivity has risen by 5.1% over the last four quarters, more than during any similar period since the first quarter of 2001 to the first quarter of 2002. That was when the economy was recovering from the internet bubble burst.”

As the chart shows, unit labor costs also declined during the same period.

Rising productivity typically precedes gains in employment. And although employment gains haven’t always translated into jobs for Americans, American worker productivity is now on par with developing countries, such as China and India. From the Conference Board (as quoted in WSJ):

“Between 2005 and 2009, for instance, the research group finds output per worker in emerging economies grew at a 5.9% annual rate. In the U.S. it grew at a 1.5% annual rate during the same period, while it grew 0.8% in Japan and 0.5% in the Euro area.”

Factory Orders

Factory Orders continue to trend higher, rising 1.0 percent in December over a rise of 1.0 percent in November. The report from the US Census Bureau indicated that shipments also rose, jumping 1.9 percent for the month of December; inventories showed little change. Much of the increase in the orders number was attributed to price hikes for petroleum and coal products. Nondurable industries showed the greatest strength with improvements in petroleum & coal products, pharmaceuticals, and beverage & tobacco.