Investors who have been waiting patiently for concrete proof that business is improving half-heartedly got an encouraging report that American workers' productivity rebounded in the second quarter, their best showing in a year. Gains in productivity are the key to rising standards of living, because they allow wages to increase without triggering inflation, which would eat up those wage gains. If productivity falters, however, pressures for higher wages could forces companies to raise prices, thus worsening inflation. The rise in productivity helped to moderate labor costs. Unit labor costs, a measure of inflation pressures, rose at a 2.1% rate in the second quarter, down from a 5.0% rate in the first quarter. The annual revisions, meanwhile, showed that from 1996 through 2000, productivity growth averaged 2.5%, compared with the 2.8% average originally reported.
Otherwise, recent economic data has been mixed, and that is evident in the movement of the markets. Thousands of layoffs in July could have contributed greatly to the rise in productivity. As long as the economic outlook is murky, the stock market will continue to narrowly fluctuate IMO. |
