Productivity Rise Eases Fed Pressure Wholesale Inventories Jump

WSJ ^ | August 8, 2008 | BRIAN BLACKSTONE

[Brilliant]

U.S. productivity remained elevated in the second quarter despite a sluggish economy and weak manufacturing, making it easier for Federal Reserve officials to balance risks to both economic growth and inflation while holding interest rates low.

Labor costs, meanwhile, slowed markedly, suggesting high energy prices have not triggered the kind of wage-price spiral that bedeviled policymakers in the 1970s and early 1980s.

Meanwhile, inventories held by U.S. wholesalers continued to rise in June, growing nearly twice as much as expected although climbing at a slower clip than sales, a government report released Friday said.

Nonfarm business productivity increased 2.2%, at an annual rate, in the second quarter, the Labor Department said Friday. The first quarter gain was unrevised at a 2.6% gain.

Wall Street economists had expected a 2.5% rise last quarter, according to a Dow Jones Newswires survey. Compared to the second quarter of 2007, productivity rose 2.8%. Productivity is defined as output per unit of labor.

Unit labor costs -- a key gauge of inflationary pressures -- advanced just 1.3%, below Wall Street forecasts for a 1.6% increase...

Fed Chairman Ben Bernanke called it "very striking that even during all this uproar... U.S. labor productivity has continued to grow faster than almost any other industrial country, and it just shows how strong this economy is."...

[SuziQ]

Democrats are deeply saddened.