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Morning Report: Productivity Increases


Vital Statistics:

Stocks are lower as bond yields continue to rise on the Fitch downgrade. Bond and MBS are down big as the Bank of England raised interest rates again.

Productivity rose 3.7% in the second quarter, which was way higher than expectations. The increase was driven by a 2.4% increase in output and a 1.3% decrease in hours worked. Unit labor costs rose 1.6%, which was driven by a 5.5% increase in compensation and a 3.7% increase in productivity.

Rising productivity is generally good news for battle against inflation, and should give the Fed more ammo to pause in September.

Announced job cuts fell 42% in July, according to outplacement firm Challenger, Gray and Christmas. They were down on a YOY basis for the first time this year. “The job market is remaining resilient in the face of rising interest rates, as consumers continue to spend and inflation falls. Companies, weary of letting go of needed workers, are finding other ways to cut costs. Many have slowed hiring, but wages continue to rise, particularly for the lowest-wage earners, for the moment,” said Andy Challenger, labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc.

Challenger has started to keep track of AI’s impact, which has the potential to do to white collar workers what robotics did to blue collar workers. “AI has the potential to completely disrupt almost every workplace. Those who become familiar with the technology will be incredibly valuable going forward,” said Challenger.

Separately, initial jobless claims remain low, rising to 227k last week.

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The services economy expanded in July albeit at a slower pace than in June. “There has been a slight pullback in the rate of growth for the services sector. This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times. The majority of respondents are cautiously optimistic about business conditions and the overall economy.” Prices did increase however which is bad news, however this seems to be an outlier in the context of other economic data.

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Weekly Initial Unemployment Claims Increase to 227,000

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