Productivity +3.1%, Unit Labor Costs +.7%
Volatile early trade sent the major averages into the final hour with small gains on mixed news. 3rd quarter productivity was unrevised and advanced 3.1% slightly less than expectations as unit labor costs gained .7% more than double the expected .3% change. On a year ago basis unit labor costs increased an upwardly revised 3% yet productivity is unchanged from a year ago. Lack of productivity growth is at least partly to blame on the anemic business investment seen since the 2008 financial crisis itself a reflection of weak demand a hallmark of credit busts.
The trade deficit widened sharply in October as imports gained 3.1 billion and exports fell 3.4 billion compliments of the now painfully strong Dollar as the total deficit jumped 6.5 billion or more than 17.5%. With president elect Trump continuing to talk trade tariffs the outlook is that trade will subtract from 4th GDP or Gross Domestic Product that needs to clock 2.6% if 2016 economic growth is to meet the Fed’s 2% desired target.
The recent run on the Dallas Texas Police and Fire pension fund brought on by retirees running for the exits and taking a lump sum withdrawal with them. Has sent the grossly underfunded and mismanaged fund careening towards insolvency as the city doesn’t have the funds to pony up the 1.1 billion Dollar bailout required to right the ship. An extreme example to be sure, but by no means unique and set to become ever more commonplace as time goes by. The Fed’s zero interest rate policies share much of the blame as do the pie in the sky 7-8% annualized returns expected by many a pension fund manager from coast to coast. Like the Japanese that have spent the better part of 3-decades trying to jump start their economy with zero interest rates at the expense of savers and retired folks, we seem destined to follow in their footsteps for much the same reasons. The debt based growth model is dead in the water having reached its logical and mathematically preordained conclusion.