On-Edge Market Eagerly Awaits Productivity Numbers
DEBORAH MARCHINI, CNN ANCHOR: Later this morning, we'll get a reading about how productive American workers are. Ahead of that, Christine Romans has been hard work looking at the U.S. work force and what the markets think about it, too. Hi.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: Hi there. Productivity numbers. This is a revision for the fourth quarter, so it's another look at what the fourth quarter -- how it performed, and they're looking for this one to be sharply revised upward in terms of U.S.-worker productivity, and that probably won't come as a surprise to the markets, but how the markets react might be another story. But what they're looking for is productivity in the fourth quarter revised to up 6.3 percent; that is from a fourth-quarter preliminary reading of up five percent. Unit labor costs, they're expecting, to fall 2.2 percent in the quarter, and this would be the single-best quarterly productivity reading in seven years, Deb.</s>MARCHINI: Christine, this is basically output per worker per hour, and if it goes up, the cost of labor, essentially, goes down.</s>ROMANS: Exactly.</s>MARCHINI: Fights inflation, right?</s>ROMANS: That's -- exactly. That's what it's supposed to do.</s>MARCHINI: Right. But will the market rally on a good productivity number?</s>ROMANS: The question is, Alan Greenspan's been a little bit concerned now by these -- this surge in productivity, because a surge in productivity allows companies to make more money and allows their stocks to do better, and that allows the people in -- or allows their corporate profits to do better, actually. The people who own those stocks do better as well. It all feeds into the wealth effect, and he is a little concerned by this wealth effect, if you read between the lines of what he's been saying lately. So at what point does the miracle of productivity start to become a little bit troublesome? There one analyst who said, miracles or not, we're going to tighten. That's what he said Alan Greenspan keeps saying. And the biggest miracle of this so-called "new economy" is productivity; it's been fed by things like corporate restructurings and technology, and that -- and economists continue to underestimate American worker productivity: 6.3 percent is unbelievable; 6.7 percent is another reading -- I mean, that's as high as some of the estimates go.</s>MARCHINI: OK, so high productivity is going to really bug Alan Greenspan. They're looking for unit labor costs to go down -- basically, the amount of labor money that goes into making a product or service -- to go down by 2.2 percent. Will that bother Alan Greenspan, too?</s>ROMANS: It probably doesn't matter if it bothers Alan Greenspan, because the markets would really like a negative 2.2 on that. What it shows to the markets is that inflation just isn't there yet, and that's what they like to see. And again, that's a really big decline, down 2.2 percent; people call it "remarkable," "miracle," "unbelievable." "Unsustainable" is another word that they use.</s>MARCHINI: Unsustainable, exactly.</s>ROMANS: But those are the kind of words that people use when they're talking about these productivity numbers, and in a very a -- it's very interesting how they're starting to read them now. You know, now you have people being sort of counter-intuitive about what it all means, and how it factors into a stock market that's already on edge will be definitely interesting to see.</s>MARCHINI: The market's latest obsession.</s>ROMANS: Exactly.</s>MARCHINI: Thanks, Christine. Thanks a lot.