What Wage Inflation? Unit Labor Costs Have Biggest Annual Drop Since 2010

Tyler Durden's picture

Less than a year ago, David Rosenberg fundamentally shifted his thesis from deflationary to stagflationary at first, and then to outright inflationary, aka from bearish to bullish, based on one simple thesis: labor costs, and thus wage inflation - that all important harbinger of broad economic inflation - have nowhere to go but up. Unfortunately, they also have another direction they can go: down.

As today's "Productivity and Costs" report from the BLS confirmed what many already know, namely those who collect a regular wage, wages are not going up. In fact, in the fourth quarter, unit labor costs plunged by 1.3%, the most since the second quarter of 2010, and prove that not only is the Fed's QE not being "trickled down" into wages, but that anyone who bet on a simple reflation thesis (not to be confused with the runaway inflation that would result from unlimited currency debasement which as everyone knows is the Fed's Plan Z) based on an expectation that wages will revert to the mean, has been proven wrong.

 

And a more amusing correlation - relative to GDP.

As for where the offsetting surge in productivity is coming from in a workforce addicted to social media and other constant distractions: perhaps that is the true $64K "New Normal" question which the central planners should be answering.

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L_Conquistador's picture

With wages going down, isn't it great that the Fed is protecting us from deflation?

Richard Chesler's picture

If you like your Koolaid you can keep your Koolaid.

 

 

James_Cole's picture

 

thus wage inflation - that all important harbinger of broad economic inflation - have nowhere to go but up. Unfortunately, they also have another direction they can go: down.

If you like your labour arbitrage, you can keep your labour arbitrage.

The GDP vs. unit labour costs is rather interesting. 

 

Smegley Wanxalot's picture

Unit labor costs are measured in burgers flipped per hour, here.

Stoploss's picture

Boy, deflation a little tougher than anticipated, no?

Smegley Wanxalot's picture

Who needs a raise when prices are dropping like a rock?

TBT or not TBT's picture

Wanking is a substitution good for prostitution and relationship based fucking, in some models. So with enough deflation and desperation out there,, smegley, your pseudonym here might become redundant.

akarc's picture

Have you priced rocks lately?

101 years and counting's picture

i hope forex traders dont see this and dump even more yen. 

island's picture

Sweet!  More wealth for the "1% and friends."  Yippee.  Yippee.  Yippee.

Bangin7GramRocks's picture

Well, they do work harder.

island's picture

Yes, they definitely work harder at theft and gambling! :-)

NoWayJose's picture

This might be one of the FEW things that the Fed looks at when calculating 'inflation' (besides the iPad price-to-feature ratio).  Nothing that people actually buy has a 1% inflation rate...

 

And this is the SAME thing that Abenomics is targeting - with equal lack of success...

SDShack's picture

Amnesty will fix this.

island's picture

Says it all:  the velocity of moolah keeps dropping.   That is, the 1% are keeping it all.  The rest of us have less to spend.  Isn't that cool?  

ArkansasAngie's picture

it's the fricking black hole ... aka insolvency of the 1%'ers that is draining away money

texas sandman's picture

Who needs higher wages?  Dear Leader MaoBama and his minions are telling us now that HealthCareUtopia is here we don't even need a freakin' job!

 

Moving along.....

Spungo's picture

"wealth effect"

NOTaREALmerican's picture

Good think we have a society that guarantees the wealth of the top 10% and is absolulely against guaranteeing a minimum wage for the dumbasses in the bottom 90%.

LOSERS!!    I don't stand around bitching about the greatest country in the world, I work for a PRIVATE TBTF financial institution, not some commy-socialist program for welfare leaches.    Get a job you hippies, and get a goddamn haircut!

akarc's picture

Thats right damn it. Oh wait a second. Self employed, don't have to get a hair cut. 

Bay of Pigs's picture

Example? Here in Maui they try to pay people $10 or $12 an hour when rent is over a $1000 bucks a month just to rent a room and milk is 8 bucks a gallon.

It's a Clown Show...a constant turnover in employees, and a transitory situation as people scramble just to pay bills and stay alive.

combatsnoopy's picture

it's the same thing in California and the food is actually produced here and still sold at top prices.
The enlightened john lennon wannabes pressing on inferiority complexes with pointless condescending attitudes because they're overrated nobodies use social pressure to push the public to pay more for what something is worth than we should. 
California is run by incompetant golddiggers and baby boomer trash, which is why it's an overpriced hole ianymore?
Disgusting for the state that harbors so much money, universities, international business and agrigulture without our own exchanges. 

 

akarc's picture

"The enlightened john lennon wannabes pressing on inferiority complexes with pointless condescending attitudes because they're overrated nobodies use social pressure to push the public to pay more for what something is worth than we should."

Your like really sure man that you ain't like talkin bout Apple, Inc. Dood. Surfs up!

 

disabledvet's picture

you can finance your buddies but not your State. transfer payments are taxed...consumption must collapse as a result.

I find the farm bill an interesting case study.
As soon as it passed the price of a gallon of milk dropped a buck.

Must be all those "food stamp recipients" and their excess consumption.

I did see that CVS took the "bold move" of not selling cigarettes at the counter anymore.

Wonder how "gambling addiction" is going over out Nevada way.
"that'll be ten thousand for that sirloin steak now bitch."

Seize Mars's picture

If you really think about the mountain of propaganda that is needed to prop up the current paradigm, it's really staggering. Really, when these guys have long discussions about deflation, it's got to be challenging for them to suppress the maniacal laughter.
Labor costs and GDP will intersect again, but it will be because GDP will fucking plummet.
GDP is another fake metric in a collection. Fake number to mask the looting. I recommend Roger Garrison's book for the diagram where the GDP is really one face of a cube which contains supply and demand curves for capital at different durations. A real eye opener.

NOTaREALmerican's picture

Re:  mountain of propaganda

You don't really need "mountain" of propaganda.   Most people in society believe very simple bullshit stories about how society is organized and who is "screwing" them.   The bullshit is generally managed and created by the two political teams.   The Blue Team uses "the evil top 1%" bullshit.   The Red Team uses "those people are getting all your hard earned tax money" bullshit.    As long as 70% of the population believes one of the two bullshit threads, the top 20% (those who really own everything) will win.  

Works for me (well, it does until the top 10% start screwing the top 20% - then I'm screwed, but hopefully I'll be dead by then).

disabledvet's picture

"long starvation" as America starts gardening just to have food period in 2014.

Bangin7GramRocks's picture

But each transient is entitled to a dime bag of Maui Wowee per week.

kchrisc's picture

Another novel from the BLS. How swell.

 

"So many for the guillotine, who goes first?!"

IREN Colorado's picture

There is no escaping this is there. The only thing the great minds and other FOOs* can do is alter the glide-slope. Impact is pre-ordained here and only the FOOs have parachutes.

Put your head between your legs and await the inevitable. Also, buy Gold. Buy beans, bullets, and bandaids. 

 

* Note: FOOs= Friend Of Obama

Spastica Rex's picture

Finally - American labor is getting off its ass and competing.

akarc's picture

"unit labor costs plunged by 1.3%, the most since the second quarter of 2010, and prove that not only is the Fed's QE not being "trickled down" into wages"

And has nothing to do with corprations able to produce more with less labor???

Spastica Rex's picture

Ansolutely. Everybody's competing to lower wages. Shangri-La.

akarc's picture

O.K. that was good. Upped ya

alangreedspank's picture

I don't know, "Unit labor cost" doesn't sound like it's the same as wage to me... 

moneybots's picture

Unit labor cost- does that include robots?

NOTaREALmerican's picture

Actually, it does:   Wages / output.  

trip kitchen's picture

Danger Will Robinson!  I'm taking your job.

robertocarlos's picture

That's OK. Mr. Smith said he would look after me.

akarc's picture

They didn't mention that did they? Then again once a person has been dehumanized enough they do take on a robot like stare.

Handful of Dust's picture

Another 10% cut to salaries in my sister's office and she's quiting. But from what I read on MSM, the more people who quit, the better the economy. Very Bullish sign they say.

akarc's picture

Well yeah, cause soon or later they are no longer counted as unemployed, the rate goes, down and everyone buys more stocks.

akarc's picture

So does this mean a minimum wage hike is needed to keep even?

Spungo's picture

" SAME thing that Abenomics is targeting - with equal lack of success..."

What do you mean lack of success? Debasing your currency makes exports "more competitive" because the flat wages in nominal terms mean everyone's income drops in real terms. Destroying your economy and creating a gigantic trade deficit is not an accident. It's the stated goal, and it has been very successful in that regard.

robertocarlos's picture

I'm lucky, I received a .9% increase this year. It beats nothing.

papaswamp's picture

Clearly it is time for the BLS to take a cue from treasury ( ala GDP regiggering) and add value...say $500B? Then everyone can feel rich even if they aren't.