Unit Labor Costs: More “worrying” news for the Fed

Compared to the second quarter of 2016, productivity increased at a 1.2% rate, quite a bit above the 0.7% year-on-year average observed since late 2010.

With productivity rising, unit labor costs, the price of labor per unit of output, fell 0.2% year-on-year in the second quarter.

Coming on the heels of a recent moderation in price pressures, the retreat in unit labor costs may be signaling the Fed to exercise “restraint”!

Bond prices rose and the dollar fell, reflecting the continuation of expected economic weakness going forward.

The Fed, focused on the rate of unemployment, is unlikely to change course, at least for the time being.


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