Are Happy Days Here Again?

Economy improves
There was a triple-dose of positive economic news on Thursday: Productivity was up, unemployment claims were down and retail giant Wal-Mart reported that its second-quarter earnings would exceed Wall Street forecasts.

Here are the highlights:

  • Productivity — the amount that an employee produces per hour of work — grew at an annual rate of 5.7 percent in the April to June quarter, the best showing since the third quarter of 2002, the Labor Department said. That marked an improvement from the 2.1 percent growth rate in productivity posted in the first three months of this year.
  • New applications for jobless benefits fell by a seasonally adjusted 3,000 to a six-month low of 390,000 for the work week ending Aug. 2. It marked the third week in a row that claims were below 400,000, a level associated with a weak job market. This suggests the pace of layoffs is stabilizing.
  • Wal-Mart dominated a set of largely positive July sales reports from U.S. retailers. Wal-Mart said it expects to report earnings of 52 cents a share for the July quarter, above the average analyst estimate compiled by Thomson First Call of 50 cents a share.

    Both the productivity and jobless claims figures were better than economists were expecting. They were forecasting productivity to grow at a 4 percent pace in the second quarter and for jobless claims to rise.

    For the economy's long-term health and rising living standards, solid productivity gains are crucial. They allow the economy to grow faster without triggering inflation. Companies can pay workers more without raising prices, which would eat up those wage gains. And, productivity gains also can bolster a company's profitability.