Today the US Labor Department said that US worker productivity rose 3.3% on a seasonally adjusted annual rate during the last quarter. That is an annual rate last time seen in Q4-2013. The increase also beat expectations of economists, who estimated an increase of 3.0%. Compared to last year, productivity was up a mere 0.7%, which shows that productivity is still modest. Nevertheless, compared to last quarter’s 1.1% decline it is a vast improvement.
ADP miss, raise concerns on Friday’s NFP
ADP Research Institute reported that private payrolls grew with 190,000 in September and thus less than expected (204,000). Also previous July-figures were revised downward to 177,000 from 185,000. This may lead to lower expectations for coming Friday’s Non Farming Payrolls, were current estimates are an increase of 220,000 in September. Friday’s NFP figures are important data for the monetary decision later this month by the Federal Reserve. During the last statement, the Fed stated that it needed to see ‘some’ further improvement to warrant a first rate hike. Analysts see an increase of above 200,000 as a key level to say the data show ‘some’ improvement.
Still no wage pressure
The Fed will also look closely at wage pressure. Today’s figures showed that labor costs fell at a 1.4% annual rate in the second quarter. This is a result of the relative sluggish productivity growth. The long term mean increase in productivity is 2.2%. As long as the pace stays below this rate, wage pressure will be very modest. However, compared to a year earlier, labor costs were up with 1.7%. But Fed Chair Janet Yellen will likely be more interested in current pace then a comparison with a year earlier.
Rate hike uncertain
Today’s figures bring a rate hike at Septembers meeting not closer. Friday’s NFP may offer little more guidance, unless we see a strong beat. The latest statistical figures are not that convincing, plus the increased volatility on the markets don’t support a lift off. On the other hand, a number of Fed officials are leaning towards a move, judging to their recent statements. Probably we have to wait until the decision on September 17.
