Today’s BLS release on Productivity and Costs shows a back-to-back decline in productivity accompanied with rising wages. Productivity is up year-over year, but barely, at 0.6%.
In practice, the Fed will be sorely disappointed with this development. Minimum wage hikes coupled with declining productivity will greatly dampen corporate hiring plans.
Marginal stores will close, customers will not like higher prices, store expansions will stall, and retail sales will decline.
Meanwhile, gas prices are rising while consumer sentiment is sinking, Imports (think crude) subtract from GDP.
The Fed FOMC committee as opposed to the Atlanta Fed GDPNow forecast says this weakness is “transitory”. I suggest Déjà Vu Weather? No, It’s a Recession!
I expect we will soon hear terms like “technical recession” coupled with the ever-popular phrase “second half recovery” as few economists believe this is the real deal.