Fannie, Freddie Performance; Labor Productivity

Both Fannie Mae and Freddie Mac reported their second quarter numbers on Friday, and the Bureau of Labor Statistics reported labor productivity results.

Both Fannie Mae and Freddie Mac reported their second quarter numbers on Friday: Fannie Mae had income of $3.7 billion for the quarter, and Freddie Mac reported income of $1.9 billion. Thus Fannie will pay $3.7 billion in dividends to the United States and Freddie $1.9 billion, under the terms of the GSEs’ conservatorships, created during the worst of the housing collapse.

During the crisis, the GSEs went bankrupt, then into conservatorship, and then started drawing financial support from the federal government. All together, Fannie drew a total of $116.1 billion and Freddie drew a total of $71.3 billion. Counting the most recent payments of dividends to the government, Fannie has paid a total of $130.5 billion and Freddie has paid $88.2 billion (that is not, however, “paying back” the government, since the bailout wasn’t structured as a loan).

REO inventory decreased in the second quarter for both Fannie and Freddie, the GSEs also reported. Foreclosed property income decreased in the second quarter and first half of 2014 for Fannie, compared with the second quarter and first half of 2013, due to a decrease in gains recognized on dispositions of REO properties.

Productivity Continues to Rise

U.S. labor productivity increased at a 2.5 percent annualized rate during the second quarter of 2014, the Bureau of Labor Statistics reported on Friday, as hours increased 2.7 percent and output increased 5.2 percent. Between the second quarters of 2013 and 2014, productivity increased 1.2 percent, as output and hours worked rose 3.2 percent and 2 percent, respectively. Labor productivity, or output per hour, is calculated by dividing real output by hours worked of all persons, including employees, proprietors and unpaid family workers.

Labor costs increased 0.6 percent in the second quarter of 2014, as the 3.1 percent increase in hourly compensation was larger than the increase in productivity. That’s a change from recent trends, which have seen productivity rise considerably, with compensation lagging behind.

Manufacturing sector productivity increased 3.6 percent in the second quarter of 2014, as output increased 7 percent and hours worked increased 3.2 percent. Productivity increased 2.9 percent in the durable goods sector and was up 5.9 percent in the nondurable goods sector. Labor costs in manufacturing decreased 1.3 percent in the second quarter and increased 0.8 percent from the same quarter a year ago.

Wall Street bounced upward again on Friday, despite renewed military action by the United States in Iraq, with the Dow Jones Industrial Average up 185.66 points, or 1.13 percent, its largest jump in more than four months. The S&P 500 was up 1.15 percent, and the Nasdaq gained 0.81 percent.