Production and Costs Topic Index

EconData Online keeps you informed on today's most crucial economics data. Steve Hackett and Bud Culbertson (Humboldt State) provide commentary, analysis, and current and historical data. Return to EconData topic index.

Data Connections and Additional Resources
Average Weekly Hours, Manufacturing

If businesses are confronted with growing demand for the product or service they produce, they have the choice of having their existing employees work more hours, which usually involves paying overtime, or keeping hours worked the same and hiring new workers. While hiring new workers eliminates the need for overtime pay, it requires the firm to incur training costs, and to pay additional health and retirement benefits for the new employees. Yet working too much overtime can impair worker productivity.

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Housing Starts

Housing starts are a leading economic indicator because they are so sensitive to interest rates and other cyclical economic variables. A rise in interest rates raises the cost of borrowing for both households and businesses, and thus when interest rates rise housing starts will react by declining. Conversely a drop in interest rates will cause housing starts to increase.

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Labor Cost Per Unit of Output

Changes in unit labor costs reflect the net effect of changes in worker compensation and changes in worker productivity. Labor is usually the single largest component of production costs. A sustained rise in unit labor costs will cause an upward shift in a firm's average and marginal cost curves.

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Labor Productivity

When labor productivity is held constant, then wage increases will shift the marginal and average cost curves upward. In contrast, if labor productivity increases but wages are held constant, then the marginal and average cost curves will shift downward. Under competitive conditions the equilibrium prediction is that wages will rise with gains in labor productivity, which may offset most of the downward shift in marginal and average cost.

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Stock Prices: S&P 500

The S&P 500 index tends to be inversely related to interest rates. The reason is that higher interest rates raise the cost of borrowing money, and all else equal higher costs result in lower profits and stock values. Likewise any other economy-wide factor that raises costs will tend to cause the S&P 500 to drop.

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