Unit Labor Costs Hit 5-year High

Back in the day, before the Great Flood [of Liquidity] and the “world went mad,” the productivity and unit labor cost release could really move the stock market.  I mean, really move the market.  The connection is through expected margins and profits.

Nothing seems to matter anymore, x/ the Fed, at least for now.   The increase in unit labor costs puts further pressure on profits and probably makes Jay Powell squirm a little bit more as it looks like the move is a trend higher.

The monthly annualized unit labor cost came in way above the 2.2 percent expectation,  which included a decline in productivity.  Note, the FRED chart below is the monthly year-on-year change.

Mr. Market

Yes, ma’am, the market can climb higher on silly Tweets but not based on valuations or the fundamentals and will do so without any of our long-term money.

Unit labor costs in the nonfarm business sector increased 3.6 percent in the third quarter of 2019, reflecting a 3.3-percent increase in compensation per hour and a 0.3-percent decline in productivity.  Unit labor costs increased 3.1 percent over the last four quarters. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.  – BLS

Someday, the fundies and valuations will matter.

Unit labor costs

FRED_Unit labor costs

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