KPIG Radio March 4

Stocks enter the final hour with small gains. Productivity took another big jump in the 4th quarter of 2009, increasing 6.9% on a revised basis, the 3rd consecutive large gain. Despite another big drop in unit labor costs, they fell 5.9%, compensation gained just .6% so most of the productivity gain accrued to the corporations or business owners through increased profits. On a real or inflation adjusted basis compensation fell 2.8% during 2009. For all of 2009 productivity increased 5.8% and this represents the biggest gain in 7-years. The 4.7% decline in unit labor costs last year is the largest on record going back to 1948.

The ICSC retail sales report for February increased for a 3rd consecutive month with a nice gain of 3.7%, which made for great headlines. Consumers continue to focus on staples, buying essential items like food, clothing and fuel. That said this report, like a number of others benefits substantially from a very weak comparison, namely early 2009 at the height of the panic over the economic crises.

Tomorrow will be a busy day as we have the February employment report and another report on consumer credit. Expectations are for additional job losses before the Census hiring kicks in for March. Weekly initial claims for unemployment benefits fell to 469,000 last week while the 4-week moving average slipped to 470,750. In fact the 4-week moving average having bottomed just after the beginning of the year has been climbing since casting real doubt as to the legitimacy of the recovery. On the subject of recovery absent employment growth any economy some 70% dependent on consumer spending, that would be ours, is facing an uphill battle for recovery when Consumer Credit continues to fall and should post yet another decline as debt levels remain painfully high and consumers continue to repair their balance sheets.