KEY DATA: Productivity: +4.9%; Labor Costs: -8.9%/ Claims: -7,000/ Layoffs: 80,666
IN A NUTSHELL: “The labor market is slowly improving, but we will get a better idea of where things stand when tomorrow’s employment report is released.”
WHAT IT MEANS: The insane downs and ups in the economy have created massive economic numbers that need to be put in perspective. Actually, I am not even sure what to make of these data. Consider third quarter productivity. It rose quite nicely, but not that much out of the ordinary. So, why am I so crazy about the data? Well, how does a 43.5% annualized increase in output and a 36.8% jump in hours worked strike you? And then there was the 19.1% jump in manufacturing productivity after having declined by 14.3% in the second quarter. Until we wash out the shut down and reopening data, some of the economic numbers will remain weird.
Jobless claims declined modestly last week and that is the good, even if it would be a lot better if the numbers fell more rapidly. At the current rate, we could see another three million workers lose their jobs this month. But the total number of people receiving checks from all the programs keeps dropping solidly and now stands at 21.5 million. Yes, that is incredibly high, but a month ago the number was five million more. So, we are making progress.
Challenger, Gray and Christmas reported that layoff notices fell sharply form September’s level. That’s the good news. The bad news was that it was over sixty percent above the number of announcements made in October 2019. Several sectors, such as leisure and entertainment, energy services and transportation continue to cut workers significantly.
IMPLICATIONS: The Fed is wrapping up its latest two-day meeting and normally, the statement and press conference would be closely followed. And they will, but given that the election outcome remains uncertain, whatever is written and said will likely go the way of the tree falling in the forest. The course of fiscal policy could be significantly different depending upon who is elected and the composition of Congress. The surprisingly strong performance of Republicans may move them back toward fiscal restraint, which they showed none of over the past few years. That is worrisome since sometimes it does make sense to spend money and right now is that time. I suspect that Fed Chairman Powell will make that clear when he holds his press conference. But for now, let’s wait and see what the final election results look like and then start to ponder where the economy may go from here.