Productivity Growth Slows Sharply: Financial News - Yahoo! Finance Quote:
WASHINGTON (AP) -- Growth in worker productivity slowed sharply in the summer while wages and benefits rose at a rate that was far below a previous estimate.
Productivity, the key ingredient to rising living standards, edged up at an 0.2 percent annual rate in the July-September quarter. That was better than the zero change that was first reported, but it was below analysts' expectation for a slightly stronger 0.5 percent increase.
The costs of wages and benefits per unit of output increased at an annual rate of 2.3 percent in the summer, a much slower advance than the 3.8 percent rate of increase first reported a month ago. The slower gain in unit labor costs was likely to be greeted with relief at the Federal Reserve, which is concerned that wage pressures could boost inflation.
The 0.2 percent growth rate for productivity followed a much stronger 1.2 percent increase in the spring and was the weakest performance since a 0.1 percent decline in productivity growth in the final three months of last year, a time when the economy was being buffeted by the effects of a string of Gulf Coast hurricanes.
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layoffs jumped 11% this past november and are expected to increase in the coming months.. as if the slumping housing market hasn't done enough, layoffs only result in lessened consumption, depressed stock prices and calls for even more layoffs - and down the spiral we go...
plus, when labor costs outpace productivity growth, the fed's ability to cut interest rates is lessened - because the inflationary effects of rate cuts are magnified in such a scenario.
and to top it all off, the dollar has been falling yet again. the fed couldn't cut rates in such a scenario, because that would mean that foreign investors would be getting less interest on a depreciating asset (the dollar). and as a consequence, they'd probably buy euros instead, resulting in even worse inflation over here.
the writing on the wall's worrisome, because in this oncoming slowdown, the fed seems incapable of lowering interest rates without worsening the economic situation. and, the federal government can't spend any more than it already is spending (and has been spending for the past 6 years under bush's horrid "leadership").
buckle up folks, and look to protect your investments (401k's, IRA's, etc..)