Labor costs show surprise decline in the third quarter

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Labor costs show surprise decline in the third quarter

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.

Labor Costs Decreased
Labor Costs Decreased

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.

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