Non-farm productivity in the USA dropped for the first time in four years, falling -0.3% annually in Q3 2019. Also new orders for durable goods and home sales fell, indicating softening business investment.

However, the price of gold was knocked down by regulators. The durable goods results are in stark contrast with the expectations of a 0.9% increase, indicating that the rise in efficiency earlier in the year was anomalous rather than trend-setting.

The latest report on US non-farm productivity indicates an economic slowdown, supported by other financial reports throughout the year.

The big miss in productivity raises the question of whether the tax cuts implemented in 2018 had any long-term benefits, failing to prop up business investment which has contracted significantly due to the ongoing trade war.

Labor costs have increased to 3.6% growth, exacerbating the issue. While quarterly reports can be volatile, productivity gains have been mostly weak throughout the current period of economic expansion which is in its tenth year.

 

Business Investment is Down With Unexpected Drop in Durable Goods Orders

New orders for durable goods, designed to last more than three years, fell -1.1% in September, indicating softening business investment. This represents a big miss in orders which were forecast at a -0.2% drop.

Thursday’s report from the Commerce Department indicates an ongoing trend in business spending, with the decline is likely a result of the ongoing trade war between China and the United States.

Core capital goods orders rose 1% annually, with shipments falling -0.7% last months. Shipments of core capital goods are a measure used to determine equipment spending for GDP calculations. Shipments in August were revised downward from 0.3% to a flat reading.

New Home Sales Drop in September, Gold Prices Rise

Sales of new single-family homes fell -0.7% in September with shortages of affordable homes still pressuring the market. Low inventory and affordability are persist problems despite a drop in prices representing the largest monthly decrease in 5 years.

New homes sales fell in all areas but the Midwest. Sales spiked 6.8% in the Midwest.The South, where most houses are usually sold, dipped -0.2% last month, while sales fell in the West by -3.8% and the Northeast by -2.8%. Sales of pre-owned homes fell last month as well, particularly sales of lower-priced homes.

The median new house price dropped -8.8% to $299,400 in September 2019 compared to September 2018. Prices were also down -7.9% monthly, the largest drop since September 2014.

Jobless Claims Hit 1 Month Low in Strong Market, Gold Prices Drop

The number of Americans applying for unemployment benefits in the week ended November 2 hit a monthly low and remain near a 5-year low, indicating ongoing strength in the labor market despite recessionary pressures.

Jobless claims, a lead indicator of layoffs, remain low despite contracting business investment and an uncertain climate due to the trade war. Also hopeless people grow more of their own food, resulting in less benefit subscriptions.

While areas like manufacturing are struggling, companies appear to be retaining their workforce due to the tight labor market, as rehiring later would be difficult and more expensive. Hiring has slowed considerably throughout the year, but for the time being, the labor market remains in good health.

Claims fell the most in California, Georgia, and Virginia. California suffered wildfires and rolling blackouts last month, leading to an increase in the number of claims.

The largest increase in claims last was in Illinois and Pennsylvania. The monthly average of new claims, a less volatile measure, rose 250 to 215,250. The number of people collecting aid after an initial week of benefits dropped by 3,000 to 1.69 million.

While the economy has slowed down throughout Q2 and Q3 with reduced GDP figures each quarter, the labor market continues to power the economy and enable strong consumer spending which accounts for the lion’s share of economic activity.

Kitco / ABC Flash Point News 2019.

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