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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Thu, 02/06/2014 - 13:37 | 4408170 L_Conquistador
L_Conquistador's picture

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

Thu, 02/06/2014 - 14:37 | 4408450 Richard Chesler
Richard Chesler's picture

If you like your Koolaid you can keep your Koolaid.



Thu, 02/06/2014 - 14:44 | 4408485 James_Cole
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. 


Thu, 02/06/2014 - 13:37 | 4408174 Smegley Wanxalot
Smegley Wanxalot's picture

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

Thu, 02/06/2014 - 13:38 | 4408179 Stoploss
Stoploss's picture

Boy, deflation a little tougher than anticipated, no?

Thu, 02/06/2014 - 13:39 | 4408184 Smegley Wanxalot
Smegley Wanxalot's picture

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

Thu, 02/06/2014 - 13:47 | 4408214 TBT or not TBT
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.

Thu, 02/06/2014 - 15:21 | 4408638 akarc
akarc's picture

Have you priced rocks lately?

Thu, 02/06/2014 - 13:37 | 4408181 Stoploss
Stoploss's picture


Thu, 02/06/2014 - 13:44 | 4408204 101 years and c...
101 years and counting's picture

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

Thu, 02/06/2014 - 13:43 | 4408207 island
island's picture

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

Thu, 02/06/2014 - 13:46 | 4408209 Bangin7GramRocks
Bangin7GramRocks's picture

Well, they do work harder.

Thu, 02/06/2014 - 13:50 | 4408228 island
island's picture

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

Thu, 02/06/2014 - 13:48 | 4408213 NoWayJose
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...

Thu, 02/06/2014 - 14:26 | 4408411 SDShack
SDShack's picture

Amnesty will fix this.

Thu, 02/06/2014 - 13:46 | 4408216 island
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?  

Thu, 02/06/2014 - 14:21 | 4408388 ArkansasAngie
ArkansasAngie's picture

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

Thu, 02/06/2014 - 13:47 | 4408217 texas sandman
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.....

Thu, 02/06/2014 - 13:48 | 4408220 Spungo
Spungo's picture

"wealth effect"

Thu, 02/06/2014 - 13:49 | 4408225 NOTaREALmerican
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!

Thu, 02/06/2014 - 15:13 | 4408609 akarc
akarc's picture

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

Thu, 02/06/2014 - 13:49 | 4408226 Bay of Pigs
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.

Thu, 02/06/2014 - 14:40 | 4408460 combatsnoopy
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. 


Thu, 02/06/2014 - 15:04 | 4408563 akarc
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!


Thu, 02/06/2014 - 14:41 | 4408477 disabledvet
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."

Thu, 02/06/2014 - 13:50 | 4408234 Seize Mars
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.

Thu, 02/06/2014 - 14:00 | 4408280 NOTaREALmerican
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).

Thu, 02/06/2014 - 14:45 | 4408488 disabledvet
disabledvet's picture

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

Thu, 02/06/2014 - 13:51 | 4408244 Bangin7GramRocks
Bangin7GramRocks's picture

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

Thu, 02/06/2014 - 13:55 | 4408255 kchrisc
kchrisc's picture

Another novel from the BLS. How swell.


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

Thu, 02/06/2014 - 14:00 | 4408291 IREN Colorado
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

Thu, 02/06/2014 - 14:02 | 4408298 Spastica Rex
Spastica Rex's picture

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

Thu, 02/06/2014 - 14:54 | 4408528 akarc
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???

Thu, 02/06/2014 - 14:59 | 4408545 Spastica Rex
Spastica Rex's picture

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

Thu, 02/06/2014 - 15:08 | 4408595 akarc
akarc's picture

O.K. that was good. Upped ya

Thu, 02/06/2014 - 14:05 | 4408302 alangreedspank
alangreedspank's picture

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

Thu, 02/06/2014 - 14:12 | 4408346 NOTaREALmerican
Thu, 02/06/2014 - 14:09 | 4408336 moneybots
moneybots's picture

Unit labor cost- does that include robots?

Thu, 02/06/2014 - 14:15 | 4408357 NOTaREALmerican
NOTaREALmerican's picture

Actually, it does:   Wages / output.  

Thu, 02/06/2014 - 14:26 | 4408410 trip kitchen
trip kitchen's picture

Danger Will Robinson!  I'm taking your job.

Thu, 02/06/2014 - 16:08 | 4408844 robertocarlos
robertocarlos's picture

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

Thu, 02/06/2014 - 15:07 | 4408587 akarc
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.

Thu, 02/06/2014 - 14:52 | 4408478 Handful of Dust
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.

Thu, 02/06/2014 - 15:05 | 4408574 akarc
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.

Thu, 02/06/2014 - 14:52 | 4408511 akarc
akarc's picture

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

Thu, 02/06/2014 - 15:14 | 4408613 Spungo
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.

Thu, 02/06/2014 - 16:00 | 4408808 robertocarlos
robertocarlos's picture

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

Thu, 02/06/2014 - 16:04 | 4408830 papaswamp
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.

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