US Q2 productivity was much worse than expected - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that the US Q2 productivity was much worse than expected falling 0.5% q-o-q annualised, and that came after a weak -0.6% reading in Q1 and an even worse -2.4% in Q4 2015.

Key Quotes

“US productivity looks to be on a long-run declining trend, which has only been temporarily resisted by bursts of unsustainable borrowing/asset bubbles. That raises the question as to what all those newly-created US jobs that the BLS is reporting are actually doing: are they subtracting value-added? It’s also something that has obvious implications for all financial market assets.

US 10-year Treasury yields rightly dipped back to 1.55% again in response; however, US equities - with no sense of historicity, or irony - decided that the crystallization of a downward trend in the one underlying economic data-series on which all material prosperity is built deserved a push in the S&P to a fresh nominal high. One can only wonder what the writer of a US productivity-focused Global Daily two decades hence will dub this particular time-period in terms of its market action. At least the broad USD index reacted rationally, dipping to 95.9 this morning in Asian trading, with JPY back under 101.50 again, raising pressure on the BoJ to get more irrational at some point soon.”