Labor costs show slower rise as trade deficit widens and jobless claims fall

Labor costs rose less than expected, but weak productivity helped keep inflation under pressure in the third quarter, according to Labor Department data released Thursday.

Unit labor costs, a measure of productivity relative to compensation, rose 3.5% for the July-September period, below the Dow Jones estimate of 4% and in down from 8.9% in the second quarter.

However, productivity only grew at an annualized rate of 0.3%, below the estimate of 0.4%, reflecting upward pressures on prices that have kept inflation around its highest level in 40 years.

In an effort to depress prices, the Federal Reserve on Wednesday enacted its sixth interest rate hike of the year, lowering its benchmark short-term borrowing rate to a target range of 3.75% to 4 %. Fed Chairman Jerome Powell said he does not believe wage pressures have been a major driver of inflation, although he added that the current pace is not consistent with the goal of inflation. 2% inflation from the Fed.

“In such a high inflation environment, productivity growth could play a critical role in easing cost pressures and protecting businesses against rising payrolls,” said Lydia Boussour, senior economist at EY Parthenon. “But today’s report indicates that companies still cannot rely on productivity gains to mitigate the effects of high inflation on their bottom line.”

In other economic news, the September trade deficit widened to $73.3 billion. That’s $1 billion more than expected and up from August’s $65.7 billion.

An unexpected increase in exports helped fuel a 2.6% gain in gross domestic product in the third quarter. Figures for September, however, indicate that average exports fell by $300 million, despite having risen 20.2% since the start of the year.

Labor market data released on Thursday showed that the employment situation has not changed much.

Weekly unemployment insurance claims totaled 217,000 for the week ended Oct. 29, down 1,000 from the previous period and slightly below the 220,000 estimate. Continuing claims, which have a week of behind the overall number, rose from 47,000 to 1.485 million, the Labor Department reported.

Meanwhile, outplacement firm Challenger, Gray & Christmas reported that announced layoffs for October jumped 13% to the highest monthly rate since February 2021.

The jobs data comes the day before the Labor Department releases its nonfarm payrolls report for October, which is expected to show a gain of 205,000.

By Admin

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