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Job Cuts Push Productivity to Post-War Record

US companies have cut so many workers that a measure of productivity comparing the prices of products to the cost of labor to produce them has jumped the most since World War II, according to Michael Darda, chief economist and strategist at MKM Partners in Greenwich, Conn.

“The ratio of selling prices to unit labor costs has risen by 5.5 percent on a year-to-year basis, the largest one-year increase in post-war history,” wrote Darda, in a note to clients. “This ratio tends to lead corporate profits by about a quarter or two and suggests that the corporate earning outlook remains highly favorable.”

So favorable, in fact, that Darda believes the S&P 500 will jump more than 18 percent from here to 1350 this year.

Despite the record productivity, companies are still not hiring. More people filed for unemployment benefits this week, according to a report today, bringing the four-week moving average of weekly jobless claims to the highest since November. Last week, the government reported the unemployment rate for February stayed the same at 9.7 percent.

“The main reason for the cyclical surge in productivity in the United States is the aggressive cost-cutting from corporate America, which is the flip side of the nearly 10 percent unemployment rate,” wrote Darda.

Companies are starting to spend, just not on workers. They are buying other companies, paying dividends and purchasing their own shares. Capital spending by US companies was up 20 percent last quarter.

“We’re seeing a sharp snapback in capital spending and inventory building should turn positive this quarter after seven consecutive declines,” said Joseph LaVorgna, Deutsche Bank’s Chief U.S. Economist, who agrees with Darda’s bullish assessment. “Productivity growth has been booming and it has to come down.”

The flip side of that: hiring

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Trader disclosure: On March 11th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (INTC), (GS), (AGU), (BTU), (MSFT), (C), (NUE); Grasso Owns (TSO), (AAPL), (ABK), (ASTM), (BA), (BAC), (BGP), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT), (FAZ); Terranova Owns (GOOG), (AAPL), (EMC), (MSFT), (DELL), (XLE); Terranova Owns (CAL) April Puts; Terranova Is Short (XLY); Terranova Works For (VRTS); Najarian Owns (AES) Calls; Najarian Owns (BAC) Call Spread; Najarian Owns (BP); Najarian Owns (C) Calls; Najarian Owns (HOLX) Calls; Najarian Owns (MCD) Call Spread; Najarian Owns (RSH) Call Spread; Najarian Owns (YHOO) Calls; Najarian Owns (CAT) Call Spread; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (USO); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finemran's Firm Owns (BAC), (BAC) Leap; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG), (GGP), (JPM), (WFC); Finerman's Firm Owns (MCD), (OSIP), (XBI); Kellly Owns (ELC) Call; Kelly Owns (GMT) Calls; Kelly Owns (AMZN) Calls; Jon Najarian Owns (AIG), Is Short (AIG) Calls; Jon Najarian Owns (BAC), Is Short (BAC) Calls; Jon Najarian Owns (C), Is Short (C) Calls; Jon Najarian Owns (GME), Is Short (GME) Calls; Jon Najarian Owns (GS), Is Short (GS) Calls; Jon Najarian Owns (JPM), Is Short (JPM) Calls; Jon Najarian Owns (MS), Is Short (MS) Calls; Jon Najarian Owns (WFC), Is Short (WFC) Calls; Jon Najarian Owns Seats On CBOE, CME, NYSE; Edwards Owns (ARO); Edwards Owns (BAC) For Clients; Edwards Owns (GS) For Clients; Edwards Owns (BKE) For Clients; Edwards Owns (JPM) For Clients; Edwards Owns (WFC) For Clients; Karabell Owns (C), (FXI), (JPM), (UYG); Funds Managed By Dennis Gartman Own (F), (CMG), (CGM), (DRI), (PNRA), (AGU), (PNR), (JOYG), (GOOG), (GMCR), (EWZ), (FAX), (PGH); Funds Managed By Dennis Gartman Are Short S&P Futures, (BBD), (AMX), (SPLS), (TM); Funds Managed By Dennis Gartman Are Long Canadian Dollar, Australian Dollar, Gold Futures; Funds Managed By Dennis Gartman Are Short EUR, CHF, British Pound Sterling, Yen

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