Q3 Productivity Registers Largest Decline Since 1960

07-Dec-21 09:22 ET

10-Year: - 2/32 1.46%   US/JPY: 113.66  EUR/US: 1.1242

Data Recon

• The revised Q3 Productivity and Unit Labor Costs report showed productivity being revised down to -5.2% (Briefing.com consensus -4.9%) from the advance estimate of -5.0%. That is the largest decline in productivity since the second quarter of 1960. Unit labor costs were revised up to 9.6% (Briefing.com consensus 8.2%) from 8.3%.
  • The key takeaway from the report is the connection between weakening productivity and rising costs, which isn't a good combination for company profits.
  • Output increased 1.8% (versus prior 1.7%) and hours worked increased 7.4% (versus prior 7.0%). The unit labor cost increase resulted from hourly compensation increasing 3.9% (from 2.9% prior) and productivity decreasing 5.2% (versus 5.0% prior).
  • From the third quarter of 2020 to the third quarter of 2021, nonfarm business sector labor productivity decreased 0.6% (versus -0.5% prior). That's the lowest four-quarter rate since the fourth quarter of 1993.
• The October Trade Balance Report showed a narrowing in the deficit to $67.1 billion (Briefing.com consensus -$66.8 billion) from a downwardly revised $81.4 billion (from $80.9 billion) in September, with exports up $16.8 billion and imports up $2.5 billion from September levels.
  • The key takeaway from the report is the uptick in both exports and imports, which is a good sign of increased economic activity on a global basis. Exports to China increased $2.8 billion and exports to the European Union increased $1.6 billion. Exports of industrial supplies and materials increased $6.4 billion.
  • The real trade deficit narrowed to $97.6 billion, which was 6.2% less than the Q3 average. That will factor favorably in Q4 GDP forecasts.

Yield check:

• 2-yr:   +2 bps to 0.66%
• 3-yr:   +3 bps to 0.94%
• 5-yr:   +3 bps to 1.24%
• 10-yr: +2 bps to 1.46%
• 30-yr: +2 bps to 1.78%

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