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Wednesday, December 03, 2008
Productivity Rises, Jobs Market Stays Under Pressure
Ken Sweet
FOXBusiness
The U.S. Labor Department said Wednesday the nation’s productivity rose more than originally expected last quarter, but labor costs remained under pressure as a slumping economy gave employees little room to ask for higher wages.
According to a report by the Bureau of Labor Statistics, the nation's productivity rate, which is measured as output per employee hour, rose at a 1.3% annual rate last quarter. That was revised upward from a 1.1% estimate the Labor Department gave last month.
The upward movement in productivity was much more than what economists were expecting. According to data provided by Thomson Reuters, economists were looking for a downward revision to 0.9%.
Labor costs, or wages that employees are paid, remained heavily under pressure however. The Labor Department said labor costs rose at a 2.8% annual rate, down from the initial estimate of a 3.6% annual rate. Economists were looking for wage costs to rise 3.1%.
Looking at a broader trend for labor costs, the government said labor costs are up 1.4% from a year, which is below the current rate of inflation. Labor costs are important to watch because if businesses are hurting, it makes it tougher for employees to ask for higher wages.
ADP Report Indicates More Job Losses Coming
In another report related to the labor market, the ADP National Employment Report, which is run by Automated Data Processing (ADP), said the nation’s private sector lost 250,000 jobs in November.
The ADP report is the first of three labor market-related reports Wall Street gets during the first week of the month, culminating with the all-important Labor Department jobs report out Friday.
The ADP report was much worse than expected, with economists looking for a private sector job loss of 205,000 jobs. Using the ADP report, it is suspected that Friday’s jobs report could indicate a loss as much as 325,000 jobs, according to FOX Business Senior Economist Mark Lieberman, though the ADP results haven't been very reliable as an indicator of what the Labor Department report will say.
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If you¿re like the vast majority of the population, buying a home is the largest personal investment you will ever make. You're buying something that¿s many times your yearly salary with the intention of holding onto that home for many years.
The bank you're going to get the money from to buy that home knows that, too. And if you're going to get a mortgage on a home, the bank wants to know how you're going to pay for said house.
Usually, you give a lot of paperwork to the bank, so the bank can tell if you're able to afford the house or not. You give them bank statements, credit card statements, letters from your employer stating your salary, tax returns, etc.
But, what happens if you may not be the perfect candidate for the home of your dreams? Or, you're buying too much home (the bank thinks you can afford a $200,000 home, you want a $230,000 home). Or, you don't have the money for a down payment. Or, you haven't paid your bills on time in the past. Or, the documents of how you make your salary are not 100% available.
Enter the subprime mortgage. Subprime mortgages are loans given by banks to people who may fall under any one of those above conditions, or others. Why would anyone want a subprime mortgage? Well, homebuyers get subprime mortgages because they get to buy the home they want. Banks give subprime mortgages because they can charge people more money for that mortgage. Remember, the difference in interest rates on a $200,000 or $300,000 home can mean the difference between hundreds of dollars in interest payments.
Still there¿s risk for both the person getting the mortgage and the bank granting it. When the playbook works, the value of the house rises. So, even if Joe Q. Badcredit couldn't afford the house he bought in 2001, at last resort Joe or the bank could sell the home, make a bundle off its increased value, and the bank could get its money back.
The playbook goes out the window, though, when home prices don't increase. Then homeowners run the risk of defaulting and banks lose money. At its worst, homeowners can lose their houses.
If you¿re in the market for a home, and the banker says you qualify for a subprime mortgage, it probably means you need to provide more documentation of how you¿re going to pay for that house. Or, you may be buying too much home. Talk with your banker about why you qualify for a subprime mortgage, and try to fix it.
