Productivity and Costs
|
| Released on
5/4/06
For
Q1 2006
|
|
Nonfarm productivity, Q/Q change, SAAR
|
| Consensus |
3.0
%
|
| Actual |
3.2
%
|
|
|
|
|
Unit labor costs, Q/Q change, SAAR
|
| Consensus |
1.3
%
|
|
Actual
|
2.5
%
|
|
|
|
|
|
Definition
Productivity measures the growth of labor efficiency in producing the economy's goods and services. Unit labor costs reflect the labor costs of producing each unit of output. Both are followed as indicators of future inflationary trends.
|
Why Do Investors Care?
Productivity growth is critical because it allows for higher wages and faster economic growth without inflationary consequences. This is a hot topic these days with the economy so strong, the labor market so tight, yet inflation so well-behaved. Some Wall Street experts assert that dramatic productivity advances are allowing the economy to sustain a much faster pace of growth than previously thought possible. Fed chairman Greenspan has expressed skepticism about those assertions, however. In either case, the productivity data give investors important clues on how stocks and bonds can be expected to perform, and the market reactions to these releases show the true importance of productivity growth.
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