Sid, I believe this news items explains alot about the bull market and why so many stocks have resisted a major pullback.
Thursday December 4 6:12 PM EST
US Productivity Booms in 3rd Quarter
By Caren Bohan
WASHINGTON (Reuters) - U.S. business productivity boomed in the third quarter at the fastest rate in nearly five years, but growth was a bit more modest than previously estimated, the government said Thursday.
Reinforcing the picture of a thriving economy was the release of data by the Labor Department showing the number of Americans applying for first-time unemployment benefits fell for the second consecutive week.
"It all adds up to a strong economy," said Robert Brusca, chief economist at Nikko International in New York. "The productivity numbers were only slightly revised and they didn't change the picture we were looking at much."
The jobless data, along with positive corporate news, helped to spark gains in stocks. The Dow Jones industrial average rose 18.15 points to close at 8,050.16.
The bond market was preoccupied by worries that the government's closely watched monthly employment report on Friday might indicate economic strength. The yield on the benchmark U.S. 30-year Treasury bond, which moves in the opposite direction of its price, briefly fell below 6 percent but later edged higher to 6.05 percent, up from 6.02 percent at Wednesday's close.
In its revised estimate of productivity for businesses outside the farm sector, the Labor Department said output per worker hour soared 4.1 percent in the third quarter, which ended in September, slightly less spectacular than the 4.5 percent gain originally reported.
The annualized third-quarter productivity growth rate was the highest since 5.9 percent in the fourth quarter of 1992. In the second quarter, non-farm productivity grew 2.4 percent.
The newly revised productivity number matched the forecasts of economists in a Reuters survey who had expected the estimate to be scaled back after the Commerce Department reported last month that U.S. gross domestic product growth for the third quarter was revised downward to 3.3 percent from 3.5 percent.
In its separate weekly jobless claims report, the department said initial jobless claims declined to a seasonally adjusted 303,000 in the week ended Nov. 29 from a revised 306,000 in the prior week.
The jobless claims were the latest in a series of data indicating a tight labor market. Normally, such signs would cause economists to worry about wage-driven inflation.
However, Christopher Low, economist at HSBC Markets, said improvements in productivity, which limit companies' unit labor costs, have helped to soothe fears for now.
"So far, we don't don't seem to have reached the threshold where we have to worry about wage inflation," Low said.
Still, he added that strength of the labor market has been surprising in light of the financial crisis in Asia that is widely expected to lead to slower U.S. economic growth.
The drop in claims in the last two weeks erased a jump that occurred early in November and returned new claims activity to around its October level, which had been fairly low.
Wall Street economists had forecast new claims of 314,000 for the latest week.
The four-week moving average of new claims, a less volatile and therefore more useful measure of jobless benefit claims, also declined last week, dipping by 3,250 to 314,000, the department said.
Some economists said the drop in the weekly claims figure confirmed tightness in labor markets and could signal a steady or lower unemployment rate for November. The October unemployment rate was at a 24-year low of 4.7 percent.
Gary Thayer, senior economist at A.G. Edwards & Sons, said a drop in the rate to 4.6 percent should not be ruled out when the department releases the data on Friday.
At odds with the productivity and jobs data were October's figures on housing completions released by the Commerce Department. These showed a 2.8 percent fall in completions, the first decline since a 5.0 percent drop in June.
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Just for you investor-ex, it wasn't even written by a corporate CEO :-)
Michael |
