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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Sultan who wrote (11366)	5/7/2002 2:36:26 PM
From: 16yearcycle	Read Replies (1) \| Respond to of 57684

I agree completely.

To: Sultan who wrote (11366)	5/7/2002 2:43:44 PM
From: stockman_scott	Respond to of 57684

Productivity Soars in First Quarter By Joanne Morrison Tuesday May 7, 1:48 pm Eastern Time WASHINGTON (Reuters) - U.S. worker productivity raced ahead in the first quarter at the fastest pace in almost 19 years as profit-hungry businesses squeezed more from their employees instead of taking on new hires amid a patchy economic recovery, a government report on Tuesday showed. The 8.6 percent surge in nonfarm worker output reported by the U.S. Labor Department trounced Wall Street's expectations, leaving little worry of inflation and giving Federal Reserve officials -- who gathered Tuesday to consider interest rates -- even more leeway to hold rates steady at 40-year lows. "This is the kind of news the Fed likes to see and means that inflation is not going to be a problem in the near-term and probably allows them to keep rates low for a while," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis. "(It) shows companies are effectively keeping costs in line as the economy recovers and will set the stage for better productivity and growth down the road." While businesses have managed to boost productivity and keep labor costs down, they are also showing some comfort with inventory levels after cutting them sharply in recent months. A separate government report showed stocks on U.S. wholesalers' shelves were unchanged in March, breaking a string of nine monthly declines. The Commerce Department report said the stock-to-sales ratio, which measures how long it would take to deplete inventories at the current pace of sales, held steady at 1.27 months. "The period of drawdowns is probably behind us, but it's not clear how anxious (wholesalers) are going to be to rebuild inventories," said Michael Moran, chief economist at Daiwa Securities America in New York. According to the Institute for Supply Management's latest semiannual report, manufacturers are indeed optimistic about the next six months, expecting revenue growth of 2.8 percent in the second half of the year. However, more job cuts could be in the picture as businesses tread above water operating well below capacity, that survey showed. MARKETS WAIT FOR FED DECISION Amid the spate of upbeat data, U.S. Treasury bonds were little changed Tuesday on a widespread belief that the Fed will not raise interest rates before mid-August and as dealers awaited the government's sale later on Tuesday of $22 billion in five-year notes. Stocks were up at midday with the Dow Jones industrial average climbing more than 100 points after Monday's sharp sell-off and the tech-laden Nasdaq composite index adding nearly 12 points after losing some ground earlier. But market players were waiting for the results of the one-day meeting of the Federal Open Market Committee, the central bank's policy-setting arm, which was expected after 2:15 p.m. (1815 GMT). Still, economists said the productivity numbers all but cemented a belief that inflation right now is nonexistent and the Fed has ample time to allow the economy to improve before raising interest rates. The showing for productivity, the best in nearly two decades, will likely help create conditions for better corporate profits. The outlook for profits is important with business spending considered by many Fed officials as crucial to a sustained upturn. "It certainly alleviates one of the Fed's bigger concerns, that is weak corporate profitability. Obviously ... plunging labor costs will help that tremendously and subsequently help boost much needed investment spending," said Richard Yamarone, Chief Economist with Argus Research Corp in New York. BEST PRODUCTIVITY GROWTH SINCE 1983 The Labor Department said productivity, or worker output of goods and services per hour outside the farm sector, grew in the first three months of the year at the fastest clip since logging 9.9 percent growth in the second quarter of 1983. That was after revised 5.5 percent productivity growth in the final quarter of 2001. "Some may call this a jobless recovery. I call it an efficiency upturn. Businesses have spent the last year restructuring and managing their work forces cautiously. It is paying off," said Joel Naroff of Naroff Economics in Holland, Pa. Unit labor costs, a closely watched gauge of wage pressures, fell 5.4 percent during the quarter. It was the steepest decline since a 6.5 percent decline in the second quarter of 1983. In manufacturing, unit labor costs declined by 6.5 percent, the biggest falloff in more than 40 years.