The unexpected decline in labor costs during the third quarter has provided some relief on the inflation front, according to the Labor Department’s Thursday report.
Unit labor costs, a gauge of hourly compensation against productivity, fell by 0.8% from July to September at a seasonally adjusted rate. This contrasts with economists’ expectations of a 0.7% gain. Over a 12-month period, unit labor costs increased by 1.9%.
The breakdown revealed a 3.9% increase in hourly compensation, offset by a 4.7% rise in productivity.
Productivity’s increase surpassed expectations, beating the Dow Jones estimate of a 4.3% rise and marking the largest quarterly gain since Q3 2020. Output rose by 5.9%, while hours worked increased by 1.1%.
These developments coincide with the Federal Reserve’s efforts to curb inflation through a series of interest rate increases. Fed Chair Jerome Powell noted on Wednesday that wage gains have significantly decreased over the past 18 months, approaching a level consistent with the central bank’s 2% inflation target.
In other economic news on Thursday, the Labor Department reported that initial filings for unemployment benefits for the week ending October 28 totaled a seasonally adjusted 217,000, a 5,000 increase from the previous period and exceeding the estimated 214,000. Continuing claims, running a week behind, totaled 1.82 million, a 35,000 increase and higher than the estimated 1.81 million from FactSet.