Home Knightsbridge Insights US Labor Cost Up at the Expense of Productivity, Inflation Not Going Away

US Labor Cost Up at the Expense of Productivity, Inflation Not Going Away

by Paul Ebeling

#labor #productivity #wages #workers #Fed #inflation

“US unit labor costs rose more than initially thought in Q-3, indicating inflation will remain high” — Paul Ebeling

We calculate unit labor costs as the ratio of hrly compensation to labor productivity.

The Labor Department said Tuesday that unit labor costs, the price of labor per single unit of output, accelerated at a 9.6% annualized rate last Quarter. That was revised up from the 8.3% pace reported in November.

Labor costs rose at a 5.9% pace in Q-2. They increased at a 6.3% rate compared to a year ago, instead of the previously reported 4.8% rate.

Economists polled forecast unit labor costs would rise at an unrevised 8.3% pace.

VirusCasedemic-related shortages along with constricted supply chains have boosted inflation well above the Fed’s 2% target.

Wages are also rising as companies scramble for workers.

Hourly compensation increased at a 3.9% rate in Q-3, rather than at a 2.9% rate as previously reported.

The surge in labor costs came at the expense of worker productivity, which fell at a downwardly revised 5.2% rate last Quarter. Productivity was previously reported to have tumbled at a 5.0% pace. It grew at a 2.4% pace in the April-June Quarter.

Compared to Q-3 of Y 2020, productivity fell at a 0.6% rate. It was previously reported to have declined at a 0.5% rate. Hrs worked increased at a 7.4% rate last Quarter, revised up from the previously estimated 7.0 pace.

Have a prosperous day, Keep the Faith!

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