This was a bad week for optimism. Many analysts in Mexico and the United States turned negative in the face of adverse indicators, and suddenly double-dip recession talk made a comeback.
Yes, oil and silver plummeted, along with other commodities. The Thomson-Reuters-Jefferies CRB benchmark index of commodities retreated a whopping 5 percent, the biggest one-day drop in more than three years. Sure, but what about the fact that the index skyrocketed from 225 last July to 375 this week?
The doomsayers claim that U.S. applications for jobless benefits climbed this week by 43,000 to 474,000, the highest in nine months, yet little do they say about temporary auto shutdowns caused by the disaster in Japan as one of the main reasons for the surge.
Actually, if you take a closer look at some of the most adverse indicators today, youd come to the conclusion that theyre in the dumps strictly due to momentary conditions that could very well be overcome next week. The dollar, for example, recouped 2% against the euro, thanks largely to the European Central Banks decision to leave benchmark rates unchanged at 1.25% for perhaps several months.
Elsewhere, its worth noting that U.S. worker productivity slowed in the first quarter and labor costs rose as a growing economy prompted companies to boost employment. The key expression here is growing economy .
In this context, the measure of employee output per hour increased at a 1.6 percent annual rate, exceeding the median forecast of economists surveyed by Bloomberg News, after a 2.9 percent gain in the prior three months, according to figures from the Labor Department in Washington.
True, companies may need to keep adding staff and increasing hours after reaching the cap of how much efficiency they could extract from their workforces at this stage of the recovery. A U.S. report today is projected to show employers hired 185,000 additional workers in April.
We're moving to the period where companies are starting to hire more workers as they ramp up output, so productivity growth is settling down, Stephen Stanley, chief economist at Pierpont Securities in Stamford, Connecticut told Bloomberg. We're going to see solid but not spectacular gains in employment in coming months, he said.
Economists projected productivity would rise 1.1 percent, according to the median of 68 forecasts in a Bloomberg News survey. Estimates ranged from no change to a 3.1 percent increase.
More U.S. workers unexpectedly filed first-time claims for unemployment insurance payments last week, pushed up by three factors that normal seasonal variations failed to take into account, another report from the Labor Department showed this week.
The latest productivity report showed output rose at a 3.1 percent rate. The increase was led by a 9.7 percent surge among manufacturers that was the biggest since 1994.
Hours worked climbed at a 1.4 percent pace after a 1.5 percent gain in the prior quarter. Compensation for each hour worked increased at a 2.6 percent annual pace.
Inflation-adjusted compensation dropped at a 2.5 percent pace last quarter, the biggest decrease since the third quarter of 2008.
Among manufacturers, productivity increased at a 6.3 percent pace, pushing labor costs down by 3.5 percent. This indicator, which essentially means more demand, is good news for Mexico, which exports many raw materials and subassemblies to U.S. manufacturers.
Compared with the first quarter of 2010, productivity climbed 1.3 percent, the smallest 12-month gain in two years. Labor costs rose 1.2 percent from the year-earlier quarter, the biggest year-to-year increase since the last three months of 2008.
The U.S. economy expanded at a 1.8 percent annual pace from January through March, after a 3.1 percent advance in the last three months of 2010. While the first quarter figure does indicate a slowdown, there are many seasonal facors to be taken into account, as the second quarter numbers are likely to indicate.
Further, signs of sustained demand are prompting companies to expand investment in capital equipment and take on more workers. Oak Brook, Ill.-based McDonald's Corp., the world's largest restaurant chain by revenue, sought as many as 50,000 workers during its National Hiring Day event on April 19.
While this weeks productivity report may show labor costs are rising, wage pressures are likely to remain contained. Federal Reserve policy makers after their April 26-27 meeting said the unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low relative to their goal.