If we needed further confirmation that the first quarter was a bit of a shocker for the US economy, the Bureau of Labor Statistics fleshed out the details further with the release on Thursday of its Productivity and Costs report.
By Peter Martin
Thursday, June 4, 2015
The data showed that non-farm business sector labor productivity shrank at an annual pace of 3.1% during the first quarter of the year, while output fell 1.6% and unit labor costs shot up 6.7%. Year over year, productivity was up, though not by much – a paltry 0.3% rise was recorded.
The brightest spot in the economy continues to be employment and today’s jobless data indicated further improvement in this area. Initial jobless claims dropped 8000 last week to 276,000, right in line with the consensus estimate. This is the 13th successive week in which initial claims have remained below the 300,000 mark, suggesting the jobs market is tightening despite the lackluster performance of the economy as a whole. Continuing claims are also very promising, dropping 30,000 to a fifteen-year low of 2.196 million for the week prior (continuing claims data lags intial claims by a week). Heading into tomorrow’s closely- scrutinized employment situation report, expectations are buoyant, with the consensus estimate for non-farm payrolls pointing to growth of a healthy 220,000.
Those expectations for a strong showing from the US jobs market has served to depress gold, often seen as a safe haven in times of economic uncertainty, and the price of the precious metal dropped 0.63% in early trading on Thursday to $1177.5 per troy ounce.
Friday also sees oil producers from the OPEC cartel meeting in order to discuss the output target for the organization. OPEC’s stance in recent months has been to maintain high production levels in order to defend market share, in spite of softer oil prices, and no change in this strategy is anticipated, with the 30 million-barrels-a-day target expected to be maintained. The price of oil has been pressured by a supply glut, though a decline in US supplies over the last few weeks appears to indicate that the US shale oil boom may be easing. The Energy Department said yesterday that US crude oil inventories fell by 1.9 million barrels last week, the fifth-successive week of declines. The total stockpile of 477.4 million barrels remains very high though. US crude oil futures slid more than 1% to $59.00 a barrel on Thursday.
The ECB met yesterday, while the Bank of England met today, and both central banks kept things on hold, as had been expected. With no monetary policy surprises, the ongoing sell-off in the bond market has continued unchecked. The speed and severity of the bond market rout raises worries that we are seeing air being let out of a bubble inflated by massive injections of liquidity from central banks, which could have implications for the stock market also. Tying into that, stocks opened lower on Thursday, the Dow Jones slipping 95 points or 0.53% to 17,981 shortly after the open, while the S&P 500 Index fell the same percentage to stand just above the 2100 mark.
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