Labor Productivity, Construction Employment, Small-Cap Stocks

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Labor productivity increased more than expected in the third quarter, as the economy continues to digest pandemic era disruptions. The labor market is weakening, unfortunately this is necessary to return to a more balanced economy. So far, the weakness hasn’t shown up in traditionally cyclical sectors. The rise in interest rates has had opposite effects on households and corporations. Nearing a record drought for small-cap stocks. Global Manufacturing PMIs.

1. Increased productivity allows for continued economic growth without inflationary pressures:

Source: The Daily Shot 11/3/2023

2. Unit labor costs unexpectedly fell in the third quarter:

Source: The Daily Shot 11/3/2023

3. The increase in permanent job losers, while still small, is worrying:

Source: @WSJ   Read full article  

4. Construction employment has been surprisingly resilient, as increased infrastructure spending has compensated for housing weakness:

Source: The Daily Shot 11/6/2023

5. The rise in non-mortgage household interest expenses is unprecedented:

Source: Economics and Strategy Group, National Bank of Canada  

6. So far, the impact on corporations has been the exact opposite, as income on cash balances is growing faster than interest paid due to fixed rate debt locked in at lower rates:

Source: Deutsche Bank via Daily Chartbook

7. The Russell 2000, which peaked over two years ago on November 4^th, 2023, is still over 30% off its all-time high:

Source: SentimenTrader  

8. Among the countries shown, India had the strongest manufacturing improvement in October:

Source: S&P Global PMI