Oil and US productivity up, US stocks and pending home sales down

Oil was up yesterday and according to this Bloomberg report, it was because of improving US productivity.

Crude oil was little changed near a record $123.93 a barrel in New York after a government report showed that U.S. worker productivity accelerated, signaling stronger economic growth and increased energy demand.

Oil almost doubled in the past year and may rise further if the economy improves in the U.S., the world's biggest energy user. Productivity climbed at a 2.2 percent annual rate in the first quarter after a 1.8 percent gain in the previous three months, the Labor Department said yesterday.

The report "shows that maybe our economy is starting to strengthen here," said Gordon Elliott, risk management specialist at FC Stone LLC in St. Louis Park, Minnesota. "It's hard to believe we could get more demand at these prices, but it could be" the case...

"Better productivity means better demand," said Phil Flynn, a commodities trader for Chicago-based Alaron Trading Corp. "We could be focusing away from the dollar and on improving demand."

Improving demand? Tell that to stock investors. From MarketWatch:

Stock finished broadly lower on Wednesday as crude-oil prices above $123 a barrel alarmed investors already worried about the impact on consumers as well as the overall economy...

The Dow Jones Industrial Average fell 206.48 points to end at 12,814.35, with 24 of its 30 components posting losses.

In truth, the productivity numbers weren't really such a good thing for demand. From another MarketWatch report:

Productivity of the U.S. non-farm business sector rose at a 2.2% annual rate during the first months of the year, the Labor Department estimated Wednesday. Read full government report...

But hours worked in the first quarter fell 1.8%, marking the biggest such decline in five years...

"Without the money to spend, consumers will be pressed, even with rebate checks in the mail, to hold up their share of the economic burden," said Joel Naroff, president of Naroff Economic Advisors, in a note to clients.

Worker compensation, adjusted for inflation, fell 0.7% in the year ended March, the biggest drop since 1995.

Meanwhile, the housing market continues to put downward pressure on the economy. Pending sales of existing homes fell 1 percent in March.