Morning Report: Productivity declines

Vital Statistics:

S&P futures4,6894.2
Oil (WTI)71.88-0.18
10 year government bond yield 1.49%
30 year fixed rate mortgage 3.34%

Stocks are flat this morning on no real news. Bonds and MBS are down small.

Nonfarm productivity declined 5.2% in the third quarter as output increased 1.8% and hours worked rose 7.4%. This is the lowest reading since 1960. Nonfarm business productivity fell 0.6%, the biggest decline since 1993. Unit labor costs increased 9.6% as compensation increased 3.9% and productivity fell by 5.2%.

Productivity is the key to non-inflationary growth. It is also the key to higher living standards. This is certainly an issue that will concern the Fed. FWIW, productivity is generally a pretty volatile measure, so one bad reading isn’t the end of the world. But it does comport with supply chain issues, rising wages and slower output increases.

Mortgage applications increased 2% last week as purchases fell 9% and refis increased 5%. The index includes an adjustment for the Thanksgiving holiday. “Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20 percent over the week,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “While the 30-year fixed mortgage rate and 15-year fixed mortgage rate both declined only one basis point, the FHA rate fell 7 basis points, driving the surge in government refinances. Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller.”

Saule Omarova has withdrawn her name from consideration to run the OCC. She was torpedoed due to some pretty out-there writings which advocated for state control of banking. Not the ideal person to regulate banks. I could see Biden tapping ex-CFPB head Richard Cordray to run the agency. He has been mentioned as a possibility for the Fed, but since he is a lawyer and not an economist he would be a better fit at OCC.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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