Key facts
- U.S. worker productivity grew at a 1.4% annualized rate in the second quarter.
- The labor share of U.S. nominal GDP fell to a record low of 52.9% in Q2.
- The labor share of U.S. nominal GDP was 53.7% in the first quarter.
- Federal Reserve Bank of St. Louis President Alberto Musalem stated policy should not chase productivity gains.
- U.S. jobless claims increased slightly last week.
- Layoffs fell to a two-year low in July.
- U.S. wholesale inventories increased 0.2% in June.
- This is the fifth consecutive quarter of inventory drawdown.
- JPMorgan Chase CEO Jamie Dimon warned about high market leverage.
- Current market leverage levels are historically high.
U.S. worker productivity experienced a faster-than-expected increase in the second quarter, growing at a 1.4% annualized rate. This acceleration in productivity, as reported by the Bureau of Labor Statistics, has helped to curb unit labor costs, which rose at a slower pace than anticipated. This development provides the Federal Reserve with more room to focus on its primary objective of bringing down inflation.
Despite these productivity gains, the labor share of U.S. nominal gross domestic product has fallen to a record low of 52.9% in the second quarter, down from 53.7% in the first quarter. This decline indicates that productivity gains are outpacing wage growth. Federal Reserve Bank of St. Louis President Alberto Musalem has cautioned against using monetary policy to chase productivity gains, stating that easier policy should not be employed for this purpose. He stressed that the central bank's priority must remain on reducing inflation, and that tolerating higher inflation today for future productivity gains could jeopardize the Fed's credibility.
In other economic indicators, U.S. jobless claims saw a slight increase last week, but overall layoffs fell to a two-year low in July. Separately, U.S. wholesale inventories were revised slightly lower, showing a 0.2% increase in June, with a reduction in nondurable goods like petroleum. This marks the fifth consecutive quarter of inventory drawdown, occurring amidst robust domestic demand.
JPMorgan Chase CEO Jamie Dimon has also raised concerns about elevated market leverage, particularly margin debt, suggesting it increases the likelihood of sudden market disruptions and investor panic. While he does not foresee a systemic crisis, Dimon noted that current leverage levels are historically high.