Photo: By Paul Nicholson on flickr
From BTIG’s Dan Greenhause, a quick rundown of this morning’s data on productivity:
- Productivity declined by 0.3% in the second quarter after falling by 0.6% in the first quarter
- Productivity is an excellent leading indicator, falling in front of a recession and bouncing early in a recovery
- Unit labour costs (the difference between compensation costs and productivity) rose by 2.2% after jumping by a much larger than expected 4.8% in the first quarter
- Unit labour costs are a very important determinant for inflationary pressures in the economy. If consumers see price increases of a significant amount, they will demand more from employers who, in response to paying more for labour, raise prices.
- Today’s report contains revisions that go back, in some cases, as far as 1947
Bottom line. QE3 will come when inflation is no longer a worry. We’re not there yet.