Companies Squeezing More Out of Workers Thursday August 7, 1:40 pm ET By Glenn Somerville
[Spin spin spin spin spin wonderful spin]
WASHINGTON (Reuters) - U.S. worker productivity surged in the second quarter at more than twice the first-quarter clip, the government reported on Thursday, adding to hopes that the economy might be shifting to a higher gear that would generate more jobs.
[BS]
The Labor Department said productivity, a gauge of how much a worker produces per hour, accelerated at a 5.7 percent annual rate, more than twice the first quarter's 2.1 percent gain.
Unit labor costs, monitored as a sign of potential wage pressure, declined at a 2.1 percent rate during the second quarter after rising 2 percent in the first quarter this year.
The Labor Department report reflected an annual benchmark revision of data that showed national productivity, or output per worker, grew at the most vigorous rate in more than half a century last year.
The revised 5.4 percent increase in productivity in 2002 -- up from a previously reported 4.8 percent rise -- was the strongest for any year since a 6.7 percent jump in 1950 during the Korean War era.
Although strong productivity growth has actually been one culprit behind the job market's woes as wary executives extract more from existing work forces, economists hope it will ultimately foster profit improvements and encourage hiring.
In a separate report, Labor said new jobless pay claims remained below the 400,000 level for a third straight week during the week ended Aug. 2 at 390,000 -- the lowest level since 378,000 were filed in the week ended Feb. 8.
Bolstering an impression of moderate improvement in job prospects, Labor said the four-week moving average of jobless claims, which smoothes out weekly gyrations, also fell below the 400,000-a-week level to 397,250 -- the lowest since the week of Feb. 22.
Analysts said the figures supported the likelihood of a pickup in economic growth during the second half but cautioned against expecting a sudden upswing in hiring.
"It is interesting that we got the one-two punch: a report that shows very little rehiring, and a report that shows why -- companies don't need new labor when they can squeeze every last bit of productivity out of the operations they are already running," said economist Lara Rhame of Brown Bothers Harriman in New York.
ECONOMY HEALING
[Look everything's okay, remember the bond crash we didn't tell you about...well it's okay now...you're getting sleepy, sleeeepy...]
The Commerce Department separately said June wholesale sales climbed by 1.5 percent, the healthiest monthly gain since a 1.6 percent increase in April 2002. New cars, electrical equipment and gasoline sales all rose from May.
Financial markets responded cautiously to the data, with stock prices up modestly in early afternoon while bond prices eased.
Economist Joel Naroff of Naroff Economic Advisers in Holland, Pennsylvania, said it appeared businesses were on the way to boosting earnings and output, but it will take time to assess.
"With earnings beginning to improve, the next logical step is for hiring to start picking up," Naroff said, adding: "We should see that in the next few months."
[Or the next few months after that...how many times have they said next few months..]
So far, the recovery from recession in 2001 has been largely a jobless one, with growth too slow to prompt businesses to invest or hire. There have been more reports of companies shedding workers and shifting jobs out of the United States to cheap-labor countries like India than of new hiring.
[No such thing as a jobless recovery.]
Consumers, by contrast, have so far held up their end of the economic bargain by shopping heavily.
[Debt.]
Reports on Thursday from big U.S. retailers showed sales in July exceeded expectations, as summer weather aided business.
Clearance sales and early back-to-school clothing demand lifted sales at department stores and specialty chains including J.C. Penney Co. Inc. (NYSE:JCP - News) and Limited Brands Inc. (NYSE:LTD - News).
Electronics retailer Best Buy Co. Inc. (NYSE:BBY - News), department store operator Federated Department Stores Inc. (NYSE:FD - News) and specialty stores AnnTaylor Stores Corp. (NYSE:ANN - News) and Abercrombie & Fitch Co. (NYSE:ANF - News) all raised their quarterly earnings forecasts.
JOBS, JOBS, JOBS
Analysts said national unemployment -- which hit a nine-year high of 6.4 percent in June before easing to 6.2 percent in July -- may be headed down.
[Or may not...]
"I think this latest report on state jobless claims is consistent with a mildly improving U.S. labor market and it very much supports the notion that the unemployment rate perhaps peaked for the cycle at 6.4 percent in June," said Moody's Investors Service (News - Websites) economist John Lonski in New York.
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