Vital Signs: Are Workers More Productive?

On tap: Fourth-quarter labor productivity, the national non-manufacturing activity survey for January, December consumer credit

After a hectic week chock full of key, and mostly upbeat, economic data, markets will get a break of sorts. The upcoming week holds few reports and only a couple that could be considered high-profile right now.

The Institute for Supply Management's national non-manufacturing activity report for January kicks things off. After the unexpected backslide in the ISM's January factory activity index, this report may garner a bit more attention. However, further signs of solid income and consumer spending, as well as a stabilizing housing market, should be significant supports for the non-manufacturing segment of the economy.

But the fourth-quarter figures on labor productivity will be the most important economic data. Economists queried by Action Economics expect an annualized quarterly gain of 1.1%. Those forecasts came before the stronger-than-expected economic growth during the quarter. Based on the impressive rise in gross domestic product, it appears as if productivity growth will come in above expectations. Stronger productivity allows the economy to grow at a faster pace that it otherwise could, without stoking price pressures.

Wholesale inventories may bear some watching as well. The fourth quarter GDP figures clearly showed some sort of inventory adjustment and it may be carrying over into the first quarter of this year. The ISM's January manufacturing activity report showed a large decline in the inventories index. The plunge to 39.9% indicated a widespread drawdown of stockpiles.

Here's the weekly economic calendar, from Action Economics.

Economic Reports
Report Date Time For Median Estimate Last Period
ISM (non-manufacturing) Monday, Feb. 5 10 a.m. January 56.3 57.1
Nonfarm Productivity (preliminary) Wednesday, Feb. 7 8:30 a.m. Q4 1.1% 0.2%
Unit Labor Costs (preliminary) Wednesday, Feb. 7 8:30 a.m. Q4 3.1% 2.3%
Consumer Credit (billion) Wednesday, Feb. 7 3 p.m. December $5.0 $12.3
Wholesale Trade Sales Thursday, Feb. 8 10 a.m. December 0.6% 1.0%


Monday, Feb. 5 - U.S. President George W. Bush issues his Fiscal Year 2008 federal budget proposal, along with the administration's updated economic forecasts.


The Institute for Supply Management issues its January report on business activity for the non-manufacturing sector, which is made up mostly of service businesses. The consensus view is that the index softened a little. The December reading of 57.1%, was off a little from 58.9% in November. Only 9 out of 18 industry sectors said that activity increased in December.

The December new orders index slowed to 54.4%, from 57.1% in November. The orders backlog index also eased, while the inventories index grew and more respondents thought their inventory levels were too high. Those results would imply weaker overall activity in the future. On the bright side, demand from abroad grew even stronger and there appeared to be more hiring.


Tuesday, Feb. 6, 1 p.m. EST - Federal Reserve Bank of Chicago President Michael Moskow speaks at a jobs, housing and transportation planning summit in Chicago.

12:45 p.m. EST - Federal Reserve Board Chairman Ben Bernanke gives the keynote speech at the annual luncheon meeting of the Greater Omaha Chamber of Commerce in Omaha, Neb.

12:45 p.m. EST - Federal Reserve Bank of San Francisco President Janet Yellen gives a speech on "Perspectives on the Asian Financial Crisis Ten Years Later: Assessing the Past and Looking to the Future" in Los Angeles.

ICSC-UBS STORE SALES - Tuesday, Feb. 6, 7:45 a.m. EST

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the period ending Feb. 3. Weekly sales dropped 0.9% during the week ended Jan. 27, after edging up 0.1% in the prior week, and holding steady in the week of Jan. 13. The increase from a year ago edged up to 4.9%, from 4.8% in the prior week.

JOHNSON REDBOOK INDEX - Tuesday, Feb. 6, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the fourth fiscal week of the year, ended Feb. 3. During the first three fiscal weeks, ended Jan. 27, sales were up 1.6%. Sales during the full month of December were up 1.7% compared to November.

MEETING OF NOTE - Wednesday, Feb. 7, 8:15 a.m. EST

Federal Reserve Bank of Philadelphia President Charles Plosser gives the keynote speech about the U.S. economic outlook to the Greater Philadelphia Chamber of Commerce in Philadelphia.

MORTGAGE APPLICATIONS - Wednesday, Feb. 7, 7 a.m. EST

The Mortgage Bankers Association issues its weekly mortgage application volume data for home buying and refinancing activity during the week ending Feb. 2. Application activity continued its recent see-saw behavior. In the latest period, the purchase index moved up to 408, from 402.7 during the week ended Jan. 19. The refi index rose to 1940.2, from 1849.1 in the week ended Jan. 19.

The four-week moving average for the purchase index was virtually unchanged, coming in at 430.8 over the week ended Jan. 19, from 430.5 in the week ended Jan. 19. The four-week average for the refi index improved to 1939.7, from 1864.8.

Mortgage rates climbed some more. The average 30-year fixed-rate mortgage grew to 6.29%, from 6.22% in the week ended Jan. 19.

PRODUCTIVITY AND COSTS - Wednesday, Feb. 7, 8:30 a.m. EST

Nonfarm productivity growth most likely accelerated some in the fourth quarter, after easing in the prior period. The consensus view is productivity grew at an annual pace of 1.1% in the October to December quarter, after registering a 0.2% annual pace in the third quarter. However, prior levels of productivity could be revised down. The Labor Dept. has upwardly revised job gains for the 12-month period through March of 2006. A larger labor force given the same level of output would reduce productivity growth.

Unit labor cost increases are expected to pick up from the third quarter rate of 2.3%, and 2.4% in the second period. On a yearly basis, unit labor costs appear to be easing. The annual pace was 2.9% in the third quarter, down from 3.1% in the prior quarter and 3.6% in the first quarter. What's more, unit labor cost growth of just nonfinancial corporations shows an even more benign scenario. In the third quarter, unit labor costs were up 0.5% from a year ago.


Consumers are expected to have accumulated a smaller amount of consumer debt in December. The level of outstanding consumer credit jumped $12.3 billion in November, following a $1.3 billion decline in October. The November increase was concentrated in revolving credit, consisting largely of credit card balances, with an $8.6 billion rise.

The November rise in revolving credit pushed the increase from a year ago to 5.9%, the fastest pace in five years. Meanwhile, the yearly growth rate of non-revolving credit stood at 3.4% in November, after an October rate of 3.3% which was the slowest pace since 1993.

JOBLESS CLAIMS - Thursday, Feb. 8, 8:30 a.m. EST

Jobless claims retreated in the week ended Jan. 27, to 307,000. In the prior week, claims were revised up to 327,000, from the originally reported 325,000. The the four-week moving average cooled to 304,750, from 309,250 in the week ended Jan. 20. Continuing jobless claims for the week ended Jan. 20 bounced back to 2.55 million, from 2.48 million in the week ended Jan. 13.


Wholesale sales growth probably kept growing. Sales grew 1% in November, after contractions of 0.4% and 1.5%, respectively, in the prior two months. The November increase was concentrated in autos and petroleum. Oil prices rose in November, starting just below $59 per barrel, and finishing near $63. The rise in oil prices influences the nominal value of petroleum sales. Computer and electrical equipment sales also improved.

Inventories still grew despite the boost in sales. November stockpiles of unsold goods rose 1.3%. The gains were pretty broad, although inventories of farm products did jump 13%.

MEETING OF NOTE - Friday, Feb. 9

Finance ministers and central bankers from the G7 countries meet in Essen, Germany.

8:45 a.m. EST - Federal Reserve Bank of St. Louis President William Poole discusses the U.S. economy at the AAIM Management Association conference in St. Louis, Mo.

Earnings Calendar
Day Companies
Monday Anadarko Petroleum, Cognizant Technology Solutions, Humana, KLA-Tencor, Pitney Bowes, Principal Financial Group, Temple-Inland
Tuesday Automatic Data Processing, Avon Products, CB Richard Ellis Group, Cisco Systems, Duke Energy, Emerson Electric, Fidelity National Information, InterActiveCorp, Lincoln National, Nabors Industries, National Oilwell Varco, TECO Energy, Tyco International, VF Corp., William Wrigley Jr., XL Capital
Wednesday AutoNation, CIGNA, Cincinnati Financial, Dean Foods, Devon Energy, DIRECTV Group, Electronic Data Systems, Equity Residential, Maxim Integrated Products, MedImmune, Moody's, Prudential Financial, Torchmark, Walt Disney
Thursday Aetna, Allegheny Energy, Aon Corp., Apartment Investment & Management, BMC Software, Broadcom, Embarq, Marriott International, PepsiCo, Qwest Communications, Thermo Fisher Scientific, Tribune, Waste Management, Windstream Communications
Friday Coventry Health Care, Peoples Energy, Weyerhaeuser
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