Labor Productivity Grows at Highest Rate in Three Years

Labor productivity in the first q🎀uarter grew at the highest annual rate in three years, data ♏from the Bureau of Labor Statistics showed Thursday.

Labor productivity was higher by 2.9% over the year, showing that U.S. workers were creating more value compared with their hours worked, potentially allowing wages to rise without pushing inflation higher. It’s🦩 the highest year-over-year growth since the first quarter of 2021. &nꦛbsp;

Compared with the fourth quarter of 2023, labor productivity increased 0.2%, w﷽ith output increasing by 0.9% and hours worked up by 0.6%.

-Terry Lane

Trade Deficit Jumps on Car, Computer Imports

The U.S. 澳洲幸运5官方开奖结果体彩网:trade deficit increased in April by $6 billion, a jump of nearly 8.7% 澳洲幸运5官方开奖结果体彩网:from the prior month, to 🎐reach its high🐻est levels since October 2022. 

The Bureau of Economic Analysis data showed exports grew in April by $2.1 billion, but it wasn’t enough to offset a jump in imports, sending the total U.S. trade deficit to $74.6 billion. The data was driven by the trade of goods, as both imports and exports of services decreased in the month. 

Car imports jumped $3 billion in April, while 澳洲幸运5官方开奖结果体彩网:capital goods, computer and tele🎐communicat𝕴ions equipment, and crude oil imports also moved higher. Semiconductor and crude oil exports helped drive U.S. gains. 

“Imports have been supported by strong domestic demand and lean inventories, while exports have contended with a ඣweaker global backdrop and a strong dollar which makes domestic goods relatively more expensive abroad,” wrote Matthew Martin, U.S. economist at Oxford Econ൲omics. 

Despite showing the biggest one-month jump in the trade deficit in a year, economists at Wells Fargo pointed to trends of “noisy” data on trade, arguing that details of the report show that the deficit may not be growing as much as perceived.

When stripping out medical, dental and pharmaceutical sales, consumer goods imports were 5% l🥃ower in April. The Wells Fargo report also noted computer sales also accounted for a significant percentage of imports. 

-Terry Lane

Mortgage Rates Continue to Seesaw Near 7% This Week

Average mortgage rates fell slig༒htly this week, according to Freddie Mac, as interest on home loans continues to dance around the 7% mark.

The average mortgage rate on a 30-year, fixed-rate loan fell to 6.99% this week from 7.03% the prior week. Rates have seesawed ne🅘ar 7% since April. Freddie Mac said they anticipate rates to modestly decline through tꦇhe end of the year.

High mortgage rates have left the housing market in a gridlock. They have priced out many would-be home buyers and have made sel🥃ling homes unattractive to potential sellers with lower interest rates. The lack of homes on the market has pushed home prices up further and fewer homes are being sold.

"As the final weeks of the spring buying season wane, we can all but be assured that this year’s peak season will be a letdown compared to beginning-of-the-year forecasts," said Realtor.com's Senior Economist, Ralph McLaughlin.

ECB Cuts Interest Rates Despite Raising Inflation Projections

Like their ﷺ澳洲幸运5官方开奖结果体彩网:Canadian counterparts a day earlier, the 澳洲幸运5官方开奖结果体彩网:European Central Bank (ECB) made its expected cut to interest rates today, de🤡spite some questions over whether the Euro area is making significant progress on inflation.

After holding rates at their peak for nine months, the ECB reduced its deposit rate by a quarter of a percentage point, its first rate cut since 2019.

The ECB cited its progress on inflation since it last moved rates higher last September, citing a 2.5% decline in inflation since then. But at 2.6% in May, inflation remains above target, and Eurosystems staff increased their inflation projections for both 2024 and 2025.

“Underlying inflation has also eased, reinforcing the signs that price pressures have weakened, and inflation expectations have declined at all horizons,” the ECB said in a statement. “At the same time, despite the progress over recent quarters, domestic ♚price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”

But with a murky path of inflation, the ECB gave little indi𒀰cation o💜n whether it would continue to cut rates, analysts noted. 

“The statement arguably gave less guidance than might have been expected on what comes next,” said Mark Wall, Deutsche Bank chief European economist.  “In that sense, the immediate t♑one is a ‘hawkish cut’. This is not a central bank in a rush ꩲto ease policy.”

The U.S. Federal Reserve will meet next week and it is not expected to move away from ꧃its current rate level of 5.25% - 5.5%. 

-Terry Lane

Initial Jobless Claims Jumped Last Week. Is It a Cause For Concern?

The number of people♔ filing for unemployment insurance for the first time last week jumped, the latest indicator that the labor markeཧt may be downshifting.

Initial claims increased by 8,000 from the prior week to a total of 229,000, according to the Department of Labor. That was higher than the prior week's total, which was revised higher to 221,000 and more than the 220,000 economists surveyed by the Wall Street Journal and Dow Jones newswires expected.

"Initial claims for unemployment insurance benefits won’t help calm financial market jitters that the labor market is weakening more than anticipated, but these seem premature and overdone," wrote Oxford Economics' Ryan Sweet.

Sweet noted that the weekly number is more volatile than usual around holidays and Memorial Day weekend may have skewed the numbers💃. The four-week moving average, which is often seen as a less volatile measure slightly decreased from 𓄧the prior week.

All eyes will now turn to tomorrow's employment report as reports this week showed 澳洲幸运5官方开奖结果体彩网:job openings fell to their lowest number since 2ไ021, private payroll growth slowed🔯 and layoffs were flat.

"Ironically, a slowing in the job market, and even an increase in unemployment, should be welcome to the extent that it alleviates some upward pressure on inflation—which we agree is what is the most important thing to focus on – but we are aware that too much weakness in the labor market and in the economy could eventually prove to be an even greater threat to markets than inflation that is 1%-2% above the Fed’s target," wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.