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Minor Econ Metrics Pave the Way Forward

Mark Vickery
The Macerich Company (MAC) opens Scottsdale Fashion Square's refurbished luxury wing. The face-lift enables the mall to add an impressive tenant lineup to its roster.

Wednesday, June 6, 2018

With a little less than four weeks remaining in calendar Q2 2018, we get some fresh reads on the health of the U.S. economy ahead of the opening bell today. Productivity and Unit Labor Costs, as well as a new Trade Deficit for April, are claiming a few headlines this morning.

Productivity in Q1 came in at a relatively disappointing +0.4%, down from Q4 2017’s 0.7% and the 0.6% expected as an analyst consensus. Seasonality is usually a culprit in Q1 Productivity compared to Q4 with its holiday shopping season and other factors, but coming in 20 basis points below projections is an indication — albeit a relatively small one — that efficiencies within American industries underperformed expectations. Then again, this is a lagging indicator, and as such less valuable; recall we’ve already got great May labor market reads last week from the BLS non-farm payroll report.

Unit Labor Costs for Q1, on the other hand, stayed consistent with projections at +2.9%, and up from an unrevised 2.7% from the previous quarter. This would point to the gradual wage growth we have seen in things like the monthly non-farm payroll reports of the past few months, but, similar to those reads, nothing appearing to be spiking out of control. In fact, labor costs have kept within a Goldilocks-like tepid upward trajectory — not too hot, not too cold.

Best of all this morning, the Trade Balance (Deficit) for April came in better than expectations: -$46.2 billion was far improved from the -$48.8 billion expected and the previous month’s -$49.0 billion. In fact, the March headline was revised significantly, to -$47.2 billion, this morning. These numbers obviously show a healthy trimming down of our national deficit, although it should be noted we’re coming off the worst period of deficits over the past few months since clawing back from the Great Recession nearly a decade ago.

These results have, if anything, tempered positive pre-market trading activity this morning. But clearly nothing we’ve seen today is snuffing out the bullishness we’ve seen over the past week. That’s because somewhat in-line reads on less than top-tier economic metrics do not normally move markets. We see green a half-hour before today’s open, though closer to breakeven than previously this morning.

Finally, athenahealth ATHN this morning announces the stepping down of co-founder Jonathan Bush, who is rescinding his positions as CEO and Director of the company. Chairman Jeff Immelt, of General Electric GE (in)fame(y), assumes the Executive Chair role. Reportedly, the health services giant is considering a sale or merger for its company, and it would appear that Bush did not intend to be part of those plans. Shares have been halted ahead of today’s open; the company had sustained a Zacks Rank #3 (Hold) prior to this announcement.

Mark Vickery
Senior Editor

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