More Data Points To 'Muddle-Through' Economy

Tuesday, June 7, 2016

This morning prior to the opening bell, the final read on Q1 Productivity and Unit Labor Costs came in at -0.6 percent — in-line with expectations and unchanged from the last quarter, which was revised from +1.0 percent. Unit Labor Costs were up 4.5 percent, revised up from 4.1 percent expected.

Productivity falling to a negative is not a good thing for GDP numbers — and we know Janet Yellen and the rest of the FOMC are paying attention to figures like these — as low productivity is what has been keeping the U.S. economy at very sluggish growth overall. A year ago, this figure was -0.8, followed by 2 quarters in a row of positive results. We may be looking at cyclical activity here, and if we are, the year over year comparisons are actually an improvement.

For Yellen’s part, she said she remains optimistic about the overall economy and warns investors against overreacting to it. Although tools available to the Fed in order to assist a growing economy are limited, there may be more up the collective sleeve of the decision-makers than simply raising interest rates a quarter of a percent (eventually). But the fact of the matter today is we now have more data pointing to stagnant U.S. growth.

Should the upcoming General Election have anything to do with this, one measure of doubt now seems to be extinguished: Hillary Clinton is now widely considered to be the frontrunner of the Democratic Party; the battle for the White House now appears to clearly be Secretary Clinton versus real estate mogul/reality TV star Donald Trump. Whether this allows anyone a sigh of relief is another matter, but the removal of doubt ought to have some positive affect on the markets in the relative near term.

Expectations are that Verizon (NYSE:VZ) will make a $3 billion bid on Yahoo’s (NASDAQ:YHOO) core business in what would be the second round of negotiations between the two firms. Noncore businesses are said to include real estate and patents, which Yahoo earlier mentioned might fetch another $1 billion. You Always Have Other Options — ain’t it the truth?

Finally, Ralph Lauren (NYSE:RL) announced a major restructuring in the works which would cut costs, streamlining its organizational structure and reducing real estate assets. Net revenue is now expected to fall in the low double-digits, hurt by store closures. Shares are down nearly 10 percent ahead of the opening bell this morning.

Mark Vickery
Senior Editor

YAHOO! INC (YHOO): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

RALPH LAUREN CP (RL): Free Stock Analysis Report

Original post