Wall Street Greek: Market News: Productivity & Labor Costs Improved

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Market News

In today's Market News, Productivity and Labor Costs were reported improved, offering the market a tasty appetizer for the day's meal. Weekly Store Sales recovered from recent poor trend, and the FOMC kicks off its two-day meeting this day. The BOJ had something to say about its economy earlier this morning. Finally, Wholesale Trade data is due later this morning, along with a few key EPS reports noted below.

Productivity & Costs Report

Second quarter productivity improved 6.4%, above the economist consensus view for 5.5% and well ahead of Q1's reported 0.3% rise. The quarter's improvement was the best since Q3 2003! Remember though, when you are rising off a poor base, big gains become more likely. We also point out that the drivers of this improvement were less than exciting. Output actually decreased by 1.7%, but the denominator, or hours worked, fell at a greater pace of 7.6%.

This suspect driver of improvement is similar to the factor that greatly aided the improved unemployment rate in July. In that case, it was a smaller labor force in the denominator that allowed for an illusory improvement in unemployment. We are still shedding jobs on net...

In the case of productivity, we're getting more out of a smaller labor force and less hours worked. The good news here is that this does lift corporate profits and cash flow, important drivers of your shares.

Productivity Improved Across Business Lines:

5.3 percent in manufacturing
3.9 percent in durable goods manufacturing
2.0 percent in nondurable goods manufacturing

Unit Labor Costs also improved (or fell) by 5.8% in the second quarter, again on the same less than best driver.

ICSC Weekly Same-Store Sales

Weekly Same-Store Sales had been dipping back into negative territory over recent weeks. Some blamed the weakness on "Cash for Clunkers" diverting funds toward other-than-retail end-market spending. We looked toward rising unemployment and credit card defaults as the culprit. Whatever the case, this week's data measuring the week ended August 8, 2009, showed a better result. Sales improved by 0.4% on a year-to-year basis, and stuck flat on the weekly count.

Bank of Japan Decision

The Bank of Japan kept its unsecured overnight call loan rate unchanged, but where would you expect the Japanese to go from 0.1% anyway... BOJ representatives said things have stopped worsening. Happy happy! Joy joy! However, business investment is down on lower corporate profits. The BOJ says prices continue to decrease, but it expects that trend to moderate by FY end in March. Regarding exit strategy, the bank notes that events will dictate whether it keeps to September deadlines for the end of special liquidity boosting measures.

Wholesale Trade Report

June's Wholesale Trade Report is due for release at 10:00 AM. According to Barron's, the consensus is looking for a 0.8% decline in inventories, versus May's similar drop. In May, sales on the wholesale level rose 0.2%, while inventories dropped 0.8%, taking the inventory-to-sales ratio to a lower 1.29 mark. This is a good thing...

Corporate EPS Schedule

The day's earnings schedule includes reports from Applied Materials (Nasdaq: AMAT), Banco de Chile (NYSE: BCH), Bob Evans Farms (Nasdaq: BOBE), Clearwire (Nasdaq: CLWR), Cree (Nasdaq: CREE), Dendreon (Nasdaq: DNDN), Federal Agricultural Mortgage (NYSE: AGM), Fossil (Nasdaq: FOSL), Gilat Satellite (Nasdaq: GILT), Learning Tree (Nasdaq: LTRE), Warnaco (NYSE: WRC) and others.