American Economics Thread


Equation

Lieutenant General
I call this BS. Low oil prices is always good for the economy.

WASHINGTON (AP) — If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.

The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending.

At $2.74 a gallon, the average price of gas nationwide is nearly $1 lower than it was a year ago. In January, the average briefly reached $2.03, the lowest in five years.

Cheaper oil and gas had been expected to turbocharge spending and drive growth, more than making up for any economic damage caused by cutbacks in the U.S. oil patch.

Consider what Federal Reserve Chair Janet Yellen said in December: Lower gas prices, Yellen declared, are "certainly good for families. ... It's like a tax cut that boosts their spending power."

Other experts were more direct: "Lower oil prices are an unambiguous plus for the U.S. economy," Chris Lafakis, an economist at Moody's Analytics, wrote in January.

So what did they get wrong?

It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth. So when oil prices fall and energy companies retrench, the economy suffers.

The drilling boom that erupted in 2008 has boosted U.S. oil production nearly 75 percent and natural gas 30 percent and made the United States the world's largest combined producer of oil and natural gas. Energy production contributes about 2 percent to economic output, up from less than 1 percent in 2000.

Yet in recent months, industry activity has dropped more sharply than predicted.

"So far, it is fair to say that we have been hurt more than helped," Lafakis acknowledges now.

During their policy meeting last month, Fed officials grappled with the changing impact of cheaper oil, according to minutes of the meeting released Wednesday. Several policymakers said the economic drag from drilling cutbacks could be "larger and longer-lasting than previously anticipated."


They also worried that the weakness in consumer spending, despite cheaper gas, suggested that Americans might generally be more reluctant to spend than assumed.

Some economists are reconsidering assumptions they use to forecast the economy.

"The benefit of lower oil prices is less pronounced than, say, 10 years ago," says Jim Burkhard, a researcher at IHS Energy. "You're taking a big engine of economic activity and cutting it sharply."

Lafakis and many others still expect consumers to spend much of their savings from cheaper gas, powering faster growth in the second half of the year. Economists say it can take up to six months for people to spend unexpected windfalls. But any gains won't likely be enough to counter the anemic start to the year.

Moody's Analytics expects the economy to expand just 2.6 percent this year, down from an earlier forecast of 3.3 percent. (The downgrade is also due in part to a stronger U.S. dollar, which has depressed exports.)

For families, the drop in gas prices was an unexpected gift. The government has estimated that cheaper gas will save a typical household $675 this year.

Yet still scarred by the recession, many remain reluctant to spend freely. Analysts also note that Americans are less likely to spend extra money if they think the gain is temporary.

"Consumers have been very reluctant to spend (savings from cheaper gas), because they view that as fleeting," says Greg McBride, chief financial analyst at Bankrate.com.

Consumer spending rose at an annual rate of just 1.9 percent in the first quarter, compared with the previous quarter's 4.4 percent. Much of the cash saved at the gas pump was put away: The U.S. savings rate reached its highest point in more than two years. Wal-Mart and Target have confirmed that their sales aren't getting much lift from cheaper gas.

For Vince Cimilluca, a 28-year-old video editor in Edison, New Jersey, lower gas prices haven't changed his finances much. He's struggling to pay $800 a month in student debt while saving for a home. He's seen gas prices gyrate and doesn't trust they'll stay low.

"The extra money that I have, I save," Cimilluca says.

For the economy, the technological breakthroughs that allowed the energy industry to power growth now help explain the slowdown. As the 2008-09 recession ended, companies used hydraulic fracturing, or fracking, to unlock underground reserves. Oil, at $100 a barrel or more, made such efforts profitable.

Jim Burkhard of IHS Energy estimates that U.S. and Canadian energy companies increased investment in production from $98 billion in 2005 to $363 billion last year. U.S. oil and gas jobs nearly doubled to 537,000. In addition, jobs were added at steel mills, at sand pits to process sand for fracking and at restaurants and service companies in areas with new-found oil and gas fields, like North Dakota and Pennsylvania.

But the industry's breakneck growth was thrown into reverse by a 50 percent drop in oil prices from June through January. CEO Doug Suttles of Encana Corp., a Canadian-based driller that operates in the United States, says the pullback in drilling "happened more rapidly than I've seen in 32 years."

As recently as December, Suttles says, experts had forecast that the number of rigs would drop by a third in the spring from a year earlier. Instead, it's plunged by more than half, according to Baker Hughes, an oilfield services firm.

That's led companies like U.S. Steel to temporarily close factories that make the steel pipe used in oil wells. Texas-based Superior Silica Sands, which makes fracking sand, has canceled the building of a factory and has slashed capital spending plans.

Investment in wells and production facilities collapsed nearly 50 percent last quarter, the government says, and cut the quarter's annual economic growth by three-quarters of a percentage point. Goldman Sachs estimates that three jobs will be lost in other industries for every position shed by energy companies as laid-off workers spend less.

That trend is painfully evident in Texas, which lost 25,400 jobs in March, the most since 2009. Many were in mining, which includes oil and gas. But most of the losses were indirect: As laid-off workers cut spending, retailers cut 6,600 jobs.

Cheaper gas has hardly been a comfort to Orlando Garza, 34, who lives near Corpus Christi, Texas, and was laid off from his job in February as a well site leader.

"I've had to cut back tremendously," Garza says. "I tell my kids, 'I don't have a job, so I can't buy it.'"
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Equation

Lieutenant General
Pentagon’s prime contractor Lockheed Martin Corp.’s LMT space unit, Lockheed Martin Space System Company has received a $735.5 million cost-plus-incentive-fee contract, under which it will provide support and maintenance services for military communication satellites for the U.S. Air Force. The satellites covered by the contract include Advanced Extremely High Frequency (“AEHF”), Milstar, and Defense Satellite Communications System III.

Work will be done in Sunnyvale, CA and at the Peterson Air Force Base and Schriever Air Force Base, CO. The contract is expected to be complete by Nov 30, 2015 and the contracting activity is Space and Missile Systems Center, the Peterson Air Force Base, CO.

These military communication satellites are specially designed to be jam resistant and provide critical support to armed forces globally, in order to increase safety and efficiency.

The U.S. Department of Defense's fiscal 2016 budget proposal emphasizes space, missile defense and cyber security on account of rising security threats. The proposed budget seeks to allocate $2.5 billion for procurement and $1.2 billion for R&D activities related to space programs to the U.S. Air Force. The U.S. Air Force aims to invest in advanced satellites which will provide strong resistance against enemy forces, eventually benefitting defense contractors amid the tepid budget scenario.

Lockheed Martin continually strives to diversify and strengthen its non-platform-centric operations. The Zeta Associates acquisition has broadened its portfolio, thereby providing access to cutting-edge defense technologies that are vital for U.S. air- and space-based intelligence missions. The Astrotech Space Operations acquisition in 2014 has also helped consolidate the company’s space operations.
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AssassinsMace

Brigadier
I call this BS. Low oil prices is always good for the economy.



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I've been reading some fracking companies have been going belly-up. I remember early on they said extracting oil and gas from shale was an expensive process and world crude prices would have to be at least $60 a barrel to profit. Who knows how that plays out because was not cutting production to keep prices low Saudi Arabia's goal to kill fracking?
 

Equation

Lieutenant General
I've been reading some fracking companies have been going belly-up. I remember early on they said extracting oil and gas from shale was an expensive process and world crude prices would have to be at least $60 a barrel to profit. Who knows how that plays out because was not cutting production to keep prices low Saudi Arabia's goal to kill fracking?
Fracking has been causing some minor earthquakes to have occurred more frequently up in the Dallas metroplex area. A study by SMU has confirmed this.

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I call this BS. Low oil prices is always good for the economy.

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It's a good thing that the average consumer is strengthening their balance sheets via lower gas price savings rather than spending all their money, but it could be a symptom of a much larger and deeper problem for a consumer based economy. If the average person needs to or wants to be either desperate or stingy enough to save unexpected windfall on what is an overhead cost, the average consumer is probably already being squeezed too much.

Corporate profits have been at record levels for years and maybe not enough has been "re-invested" via more jobs, higher wages, or less obvious things like flexible hiring for average workers. By flexible hiring what I mean is something like hiring for capability versus credential, or in other words who pays for training, it used to be more common that companies will hire you if you are capable of a job and then train you to do it, now it is more common for applicants to be considered only if they already have the specific experience or credentials for a job or skill. That passes the cost of training to the worker and the training is less efficient for the overall economy because companies have the benefit of combined scale and exact expertise compared to individual potential workers who might still not get a job after getting training going to third party schools who impart skills which might not be an exact match for what the companies need.
 

Equation

Lieutenant General
All of a sudden, the first quarter was gone.

On April 2, just a few days after the first quarter officially ended — but still about a month before we'd get our first read on economic growth to start the year — the
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that the economy did not grow at all to start the year.

At that time, Wall Street was still expecting that the first quarter would show an economy that had slowed to start the year, but would still grow around 2%.

Something, it seemed, was wrong.

A few days later, the
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showed that in the final month of the year's first quarter, the economy added the fewest number of jobs it had added in a year.

In March, 126,000 jobs were created, far below Wall Street forecasts. The unemployment rate was unchanged at 5.5%, and perhaps the most negative part of the report were revisions to prior reports, which saw jobs gains in both January and February decreased after the fact.

This report served the latest disappointment in a
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, and was in the minds of many a sign that the economic story would not change in 2015: Things still aren't that great.

And it was just the beginning of the month that would completely change the conversation surrounding the economy.

GDP Flop

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the economy grew just 0.2% to start 2015.

In 2014, the economy contracted 2.1% to start the year, a move that was attributed to poor winter weather and an economy that simply wasn't all that robust. After a strong second half of the year, 2015 was supposed to be the year things changed. This time, it was supposed to be different.

By the time we got to the April 29 GDP reading, the Atlanta Fed's model indicated that we'd see an economy that grew just 0.1% in the first quarter.
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.

Even after significant forecast reductions during the quarter, Wall Street expectations still far overstated this first GDP number. Ahead of the report, Deutsche Bank's Joe LaVorgna wrote that, "It is possible that GDP growth (specifically productivity) is being understated, because the income side of the economy has not experienced the same degree of weakness evident in the output figures."

And despite a wide miss, economists held their ground.

In a note following the Q1 GDP report, Paul Ashworth at Capital Economics wrote, "The 0.2% annualised gain will raise fears that the recovery is somehow coming off the rails but, just like last year, we anticipate a marked acceleration in growth over the remaining three quarters of this year. Over the past 12 months the economy has expanded by 3% and we would expect it to continue growing at around that pace this year too."

The Federal Reserve, saw it this way, too.

"Transitory"
On the same day that we got the disappointing news about first-quarter GDP growth, the Federal Reserve
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.


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from the Fed's April meeting, we got an inside look at what the Fed was thinking about during that April meeting. And these discussions indicated that the Fed raising interest rates in June was largely taken off the table.

The same story was going to play out again.

The r-word

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showed that Americans were simply not spending money the way economists had been expecting, especially after the crash in oil prices we saw in the second half of 2014.

This disappointing report led some to declare that the US economy was heading for a recession, the word absolutely no one expected to come up in 2015. A recession, or two consecutive quarters of negative growth, is the kind of thing that would almost certainly put a Fed interest rate hike off the table.

And while many would argue that with inflation still running below the Fed's 2% target and wage growth still tepid, the Fed shouldn't be thinking about hiking rates anyway, a recession would make any argument moot. You simply don't tighten financial conditions into an economy that is slowing down.

Earlier this week,
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from Deutsche Bank's Jim Reid, who said we may well be looking at an economy that shrank in the first half of the year, as our old friend —
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— currently indicates that the economy grew just 0.7% in the second quarter. Expectations for future revisions to first-quarter GDP indicate that the economy may have shrunk 1% or more to start the year.

Add these quarters together and you're in the red.

A determined Fed
On Friday, Federal Reserve chair Janet Yellen
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that the economic slowdown we saw to start the year was transitory.

Speaking in Providence, Rhode Island, Yellen said:

If confirmed by further estimates, my guess is that this apparent slowdown was largely the result of a variety of transitory factors that occurred at the same time, including the unusually cold and snowy winter and the labor disputes at ports on the West Coast, both of which likely disrupted some economic activity. And some of this apparent weakness may just be statistical noise. I therefore expect the economic data to strengthen.

Yellen added:

For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.


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."


And while it is doubtful anyone at the Fed would characterize their decision to raise rates as a "just because," sort of thing, the Fed is still clearly pointing itself towards a rate hike later this year.

Earlier this week
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from the Fed Minutes that indicated the Fed is clearly concerned about potential negative reactions from markets to a change in monetary policy. In fact,
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Yellen would use her speech Friday as something like a trial balloon to see how markets handle indications that we're approaching a regime change.

Markets, for their part, took Yellen's words on Friday in stride.

"... any specific projection I write down will turn out to be wrong."
In her speech on Friday, Yellen admitted that her outlook for Fed policy is predicated on an economic recovery that, in her mind, is coming up.

But this is no guarantee.


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, "I am describing the outlook that I see as most likely, but based on many years of making economic projections, I can assure you that any specific projection I write down will turn out to be wrong, perhaps markedly so."


And so whether or not the economy the Fed believes we have comes back to life or not is the million-dollar unknown.

What we know is that the Federal Reserve expects the economy will be back. And if this is the case, the Federal Reserve will raise interest rates this year. What we also know is that the economy performed worse to start the year than almost anyone foresaw, and a bounce back is no sure thing.

How these tensions resolve themselves — a stubbornly soft economy and a stubbornly determined Fed — is the biggest question in markets for the rest of this year.

A Federal Reserve rate hike could come and go without a hitch, making the market's collective hand-wringing all seem for naught. The economy could come storming back — leading us to ask if there isn't, perhaps, a
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.

Or, as happened in April, the conversation could change, leading us to ask a new set questions to a new set of problems.
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Bernard

Junior Member
  • Thread Starter Thread Starter
  • #17
U.S. Economy Contracted 0.7% in First Quarter
By
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MAY 29, 2015


Even as the housing market pointed to strength, the first quarter’s showing in the gross domestic product was hurt in part by labor trouble at West Coast ports and a harsh winter. Credit Monica Almeida/The New York Times


The United States economy got off to an even weaker start this year than first thought, the government reported Friday, as economic activity contracted because of a more dismal trade performance and continued caution by businesses and consumers alike.

The 0.7 percent annual rate of decline in economic output in the first quarter of 2015 was a reversal of the initial 0.2 percent advance for the period
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by the Commerce Department.

Although statistical quirks and one-time factors like wintry weather in some parts of the country played a role, as did a work slowdown at West Coast ports, the lackluster report for January, February and March underscores the American economy’s continuing inability to generate much momentum.

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The pullback was the third time that economic activity had posted a quarterly contraction since the current recovery began in mid-2009, with declines in output in the first quarters of 2011 and 2014. Even acknowledging flaws in the way the government takes account of expected seasonal variations, that on-again, off-again pattern helps explain why annual growth rates in recent years have been well below the pace of gains recorded in the 1990s and mid-2000s.

Much of the revision reported Friday was spurred by new data showing that exports fell more than first thought and imports rose higher. Economists at Goldman Sachs noted that the change in the trade balance shaved 1.9 percentage points off overall growth last quarter, the largest quarterly drag from net exports in three decades.

Volatile even in the best of times, the trade balance is especially hard to gauge in the wake of a
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. Although the balance was negative in the first quarter, some experts like Ian Shepherdson of Pantheon Macroeconomics say a return to normal trade patterns could propel a healthy rebound in the second quarter.

But he cautioned that the data remained in flux and warned that even his own estimate could end up being wide of the mark.

“Anybody estimating gross domestic product for the second quarter is kidding themselves, because the trade data is so unpredictable at the moment, and we have no hard numbers yet,” Mr. Shepherdson said. “I’m guessing there will be a reversal in trade flows, and we’ll see 3 percent growth in the second quarter. But it could be anywhere between 1 percent and 5 percent.”

Exports had been a particularly bright spot for the American economy in the first years of the recovery, as world trade rebounded from the plunge that followed the financial crisis in late 2008 and early 2009. Those gains have moderated more recently, and are likely to remain under pressure as the stronger dollar makes American goods more expensive for overseas buyers.

Most experts had expected the data released on Friday to show a contraction in the first quarter, and virtually no mainstream economists are predicting that the economy is about to fall into a recession. Still, the weak start for the year is a crucial reason that the Federal Reserve has pulled back from any plans to raise short-term interest rates in June, with officials now suggesting that the first rate increase from near zero is not likely to come until September or even later this year.

Although Wall Street and the Fed are already looking ahead to the June 5 report on employment gains in May and other more recent data, the rearview mirror take on economic activity discouraged buying on the stock market. At the end of trading on Friday, the Dow Jones industrial average, the Standard & Poor’s 500-stock index and the Nasdaq were all off 0.6 percent. Bond yields also crept lower.
After the economy grew at an annual rate of nearly 5 percent
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and
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, some experts concluded that the economy had found its footing and predicted that a healthier, sustained growth rate of near 3 percent was finally at hand.

The new data for the first quarter of 2015, and signs of only a tepid rebound in the current quarter, are forcing some economists to rethink earlier assumptions.

“This isn’t the off-to-the-races kind of expansion we envisioned six months ago,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “More and more folks are coming around to the view that the long-term growth rate of the American economy is 2 percent, at best. We can’t sustain 3 or 4 percent growth for very long, so it’s two steps forward, one step back.”

Although cloudy, the economic outlook is not particularly dark.

Unemployment has been falling steadily, and experts think it could fall to about 5 percent by the end of the year,
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. The jobless rate stood at 8 percent a little over two years ago.

The real estate market has also been robust as of late, with a measure of pending home sales last month hitting a nine-year high, according to data released Thursday by the National Association of Realtors. New-home sales and construction were also strong in April.

Indeed, an upward revision in residential construction last quarter offset some of the weakness elsewhere.

Photo

Despite the windfall provided by lower gasoline prices, consumer spending, which accounts for roughly two-thirds of economic activity, was only modest. Credit Jim Young/Reuters
Despite the windfall provided by lower gasoline prices, consumer spending, which accounts for roughly two-thirds of economic activity, was only modest. Personal consumption rose by 1.8 percent last quarter, down from 4.4 percent in late 2014.

Experts say some of the weakness in the first quarter of the year reflects how the numbers are analyzed by government statisticians to account for seasonal variations, like the retail slowdown that follows the holiday shopping season or business activity that is lowered as temperatures plunge.

That process, known as seasonal adjustment,
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the underlying weakness last quarter, according to an analysis by private economists at firms like Barclays and Macroeconomic Advisers, as well as at the Federal Reserve Bank of San Francisco.

Whatever role that seasonal adjustments did play, however, Mr. Anderson cautioned against dismissing the first-quarter weakness as entirely a statistical quirk.

“Some economists have been trying to explain away the negative numbers,” he said. “I don’t think it’s so easily dismissed. We will get a modest bounce back this quarter.”

In particular, he said, the dollar’s surge against foreign currencies like the euro is hurting manufacturers and other exporters, a trend that is likely to continue even with the resolution of the West Coast port slowdown.

Although Mr. Anderson expects the annual rate of growth to rebound to above 2 percent this quarter and to about 3 percent in the second half of 2015, that still leaves his estimate at 2.2 percent for the annual growth rate for the year. Last year, the economy grew at an annual rate of 2.4 percent.

“There’s some truth to the statistical issues and the one-time factors, but we are still left with a real deceleration,” Mr. Anderson said. “Two percent is probably where the economy will gravitate longer term.”

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Equation

Lieutenant General
Despite the slump in the first quarter, businesses generally remain optimistic about the medium term. The small business optimism index is near post-recession highs, and larger businesses were also more optimistic about the economy in the first quarter, according to the Business Roundtable.

I’m not arguing that the economy is firing on all cylinders. We’ve got major structural problems, as well as cyclical headwinds that are holding back growth (especially the strong dollar).

But the picture isn’t nearly as dire as that painted by the 0.7% drop in GDP.
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Equation

Lieutenant General
I'm getting all kinds of different outlook and views regarding the current US economy. So take every news with a grain of salt.
WASHINGTON (Reuters) - U.S. nonfarm productivity fell more sharply than initially thought in the first quarter, leading to a jump in labor-related production costs, a trend that could ignite inflation if sustained.

Other data on Thursday showed the labor market tightening, with first-time applications for unemployment aid falling last week and the number of people on benefit rolls hitting the lowest level since 2000. The reports likely keep the Federal Reserve on track to raise interest rates later this year.

"It's not our base case, but should productivity growth remain muted, this would increase the risk for a more rapid pickup in inflation and potentially require a faster hiking cycle than the Fed currently foresees," said Michael Hanson, an economist at Bank of America Merrill Lynch in New York.

Productivity fell at a 3.1 percent annual rate instead of the previously reported 1.9 percent pace, marking the first back-to-back fall since 2006, the Labor Department said. It rose only 0.3 percent from a year ago.

According to JPMorgan, productivity was up a meager 0.6 percent annualized over the past five years, the worst five-year run since the early 1980s and the worst five-year performance on record outside of a recession.


The data came as the International Monetary Fund, in its annual assessment of the U.S. economy, said the U.S. central bank should delay hiking rates until the first half of 2016.

U.S. financial markets were largely unmoved by the data as investors focused on a global bond sell-off. The dollar fell against the euro while U.S. stocks were trading lower. Prices for U.S. Treasury debt rose.

While the productivity decline mirrors the economy's dismal performance in the first quarter, when gross domestic product contracted at a 0.7 percent rate, it has also been stifled by inadequate investment in capital.



INVESTMENT LACKING

"The labor productivity trend has been crushed by lack of investment leading to an unprecedented decline in capital intensity. The ratio of capital services per hour worked fell slightly in 2011, 2012, and 2013, the first run of three declines on record," said Ted Wieseman, an economist at Morgan Stanley in New York.

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Job seekers work on applications during a job hiring event for marketing, sales and retail positions …
But the drop in first-quarter productivity could be overstated, given a confluence of temporary factors that weighed on GDP. A rebound is expected in the second half of the year as businesses spend more on research and development, as well as on software and equipment.

Still, weak productivity suggests the economy's potential growth could be lower than the 1.5 percent to 2.0 percent pace economists currently estimate.

Unit labor costs, the price of labor per single unit of output, increased at an upwardly revised 6.7 percent rate in the first quarter, the fastest pace in a year. They were previously reported to have increased at a 5.0 percent rate.

Unit labor costs rose at a 1.8 percent pace compared to the first quarter of 2014, a sign wage inflation is benign for now.

"The Fed is assuming a rebound in productivity which will allow them to gradually tighten monetary policy. If the current trend continues into 2016 and 2017, the Fed will have to tighten monetary policy much more quickly," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester in Pennsylvania.

In another report, the Labor Department said initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 276,000 for the week ended May 30. It was the 13th straight week that claims held below the 300,000 threshold, which is usually associated with a strengthening labor market.

The tightening jobs market underscores the economy's solid fundamentals even though growth is struggling to regain steam.

The economy got off to slow start in the second quarter in part because a strong dollar and spending cuts in the energy sector constrained manufacturing activity.

There are, however, signs of some pickup, with data this week showing a surge in automobile sales in May and gains in factory activity for the first time since November. In addition, the trade deficit narrowed sharply in April and construction spending hit its highest level since November 2008.

Thursday's claims report showed the number of people still receiving benefits after an initial week of aid fell to its lowest level since November 2000.
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Equation

Lieutenant General
OTTAWA/MEXICO CITY, June 4 (Reuters) - Canada and Mexico will seek World Trade Organization authorization to impose over $3 billion in sanctions against U.S. exports in retaliation against contentious meat-labeling laws, the two nations said on Thursday.

U.S. legislators have signaled they plan to repeal the 2009 laws, which Canada and Mexico says makes their meat products more expensive.

In May, the WTO upheld an earlier ruling that country-of-origin labeling (COOL) rules illegally discriminate against imported livestock from Canada and Mexico, rejecting a U.S. appeal.

The decision formally allowed the two countries to impose trade sanctions against the United States, which must be approved by the WTO.

Mexico and Canada are therefore seeking an extraordinary session of the WTO's dispute settlement body on June 17 to authorize the punitive measures.

"Despite the WTO's final ruling that U.S. country of origin labeling measures are discriminatory, the United States continues to avoid its international trade obligations," Canadian Trade Minister Ed Fast said in a statement.

Canada said it wanted to impose just over C$3 billion ($2.4 billion) in sanctions while Mexico is looking for $653 million worth of punitive measures.

Ottawa is likely to target beef, pork, California wines, mattresses, cherries and office furniture, Farm Minister Gerry Ritz said on Tuesday.

"The governments of Mexico and Canada will keep working closely to resolve this important commercial dispute with the United States, with an aim to defend our farmers and breeders and maintain jobs and economic prosperity in all of North America," the Mexican economy ministry said in a statement.

In 2009, the United States required that retail outlets use labels such as "Born in Mexico, Raised and Slaughtered in the United States" to give consumers more information about the safety and origin of their food.

Consumer groups and some U.S. lawmakers say the rules provide essential information about products for shoppers.
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