New analysis on the labor market – from Axios:
- Unit labor costs— or how much a business pays workers for a single unit of output — rose at a 3.2% annualized rate in the final quarter of last year, according to revisions released by the Labor Department. That came, in part, because of a downward revision in worker productivity.
- Unit labor costs rose much faster than the initially reported 1.1%, but the rate of increase slowed consistently throughout 2022. In the first quarter of the year, for instance, unit labor costs rose at an 8.5% annualized pace.
The numbers reflect both labor measurements (wages, and how many hours were worked) and the nation’s economic output.
- In the first half of the year, economic growth was sluggish — even alongside a booming labor market — resulting in ugly productivity and labor costs.
- But that flipped some in the second half. GDP rebounded and some steam came out of the labor market, helping lift the productivity figures.
And January’s job data was robust. Five hundred seventeen thousand and a five-decade low in the jobless rate. We’re expecting more color on that data soon.
Why do we care?
Strong job data and robust productivity data. For me, it’s an indication of worker power right now. Each worker is valuable, and there are fewer of them. I’m dismissive of those saying the power is swinging. Not from where I sit; it isn’t.
The actionable insight – helping businesses do more with what they have via digital technologies, linking to the revenue or cost of goods sold lines in a P&L- will be the critical sweet spot.