May

07

Premarket May 7,2008

By Chuck

 Print This Post

The futures jumped on the following news:

Q1 PRELIMINARY NONFARM PRODUCTIVITY: 2.2% V 1.5%E; UNIT LABOR COSTS: 2.2% V 2.6%E
- Prior Non-farm Productivity revised from 1.9% to 1.8%
- Prior Unit Labor Costs revised from  2.6% to 2.8%

Here’s more of an explanation on these numbers.  Funny how people get excited over a slowing labor market.

Productivity measures how much an employee produces for each hour of work. Generally, as the economy slows, companies pull back production, hiring and other spending to try to boost efficiency and lower costs.

The U.S. economy expanded at a 0.6 percent annual pace the first three months of this year. Over the past two quarters, the pace of growth has been the weakest since the final six months of 2001, when the economy was in a recession.

Hours worked dropped at a 1.8 percent pace, the most since the first quarter of 2003, today’s report showed.

U.S. employers cut payrolls in each of the last four months, bringing the total number of jobs lost this year to 260,000.

Compared with the same period last year, productivity rose 3.2 percent, the biggest gain in almost four years.

Unit labor costs, which reflect the gain in efficiency, were up 0.2 percent compared with a year earlier, the least since the second quarter of 2004.

Compensation for each hour worked increased at an annual rate of 4.4 percent in the first quarter, compared with 4.6 percent the final three months of 2007, today’s report showed.

Less Buying Power

Adjusted for inflation, hourly pay decreased 0.7 percent in the year ended in March, the weakest performance in almost 13 years. That is one reason economists are forecasting consumer spending, which accounts for more than two-thirds of the economy, will slow in coming months.

A Labor Department report last week signaled the slowing job market is subduing wages. Average hourly earnings rose 0.1 percent in April, the least in six months, the government said.

Smaller increases in wages, which account for about two- thirds of the cost of producing a good or a service, would reduce inflationary pressures. Some Federal Reserve policy makers have said they are concerned increases in food and fuel costs will boost other prices. ……………..

Electronic Data Systems Corp., the world’s second-biggest computer-services provider, last month reported first-quarter profit that beat estimates as contract signings soared 66 percent. Productivity improvements, such as reducing facilities that store client data, helped lift earnings by 2 cents a share.

Cutting Staff

Chief Executive Officer Ronald Rittenmeyer is firing workers and moving jobs to lower-cost labor markets such as India to reduce spending and attract more clients with lower prices. While a slowing U.S. economy has forced some clients to reduce spending on small projects, especially in the manufacturing and consumer- products industries, other customers are spending more, Rittenmeyer said.

March Pending Home Sales numbers are due out at 10am ET.