South-Western EconData -- Labor Cost Per Unit of Output

Explore further current and historical data for the Labor Cost Per Unit of Output and how it relates to Real GDP , the Inflation Rate, and Real Worker Compensation.

Current and Historical Data for the Labor Cost Per Unit of Output
Review the current and historical data for the Labor Cost Per Unit of Output by quarter at Economagic.com.

Unit Labor Cost- Manufacturing and Real GDP: Annual Percent Change Relative to Same Period Last Year
We would generally expect an inverse relationship between unit labor cost and real GDP, and the data in the diagram below are consistent with that expectation. Recall that unit labor cost rises as worker compensation rises, but falls as labor productivity rises. Thus we would expect that times of rising labor productivity and weak wage demands, such as during the recovery period following a recession, will produce declining unit labor costs and strong economic growth. This effect is evident during the recovery periods of 1983-1984, 1992-1993, and 2002-2003. In contrast, note that rising unit labor costs tend to be associated with slower rates of productivity growth and periods of economic slowdown and recession.

Economagic.com provides a more complete collection of data for the following:
Unit Labor Cost -- Manufacturing Sector I Real GDP

Unit Labor Cost- Manufacturing and the Consumer Price Index: Annual Percent Change Relative to Same Period Last Year
We would generally expect a direct relationship between unit labor cost and inflation, and the data in the diagram and table below are consistent with that expectation. Growth in unit labor cost reflects increases in worker compensation that are not justified by increases in labor productivity, and consequently leads to growing inflationary pressure. Conversely, declines in unit labor cost imply labor productivity is outstripping worker wage demands, which reduces inflationary pressure. Times of high inflation, such in the early 1980's, create a vicious cycle of rising unit labor cost as worker wage demands are pushed by the need to maintain purchasing power. Consumer prices have increased somewhat since the recession of 2001. Likewise unit labor costs began increasing again in 2003.

Economagic.com provides a more complete collection of data for the following:
Unit Labor Cost -- Manufacturing Sector I Inflation Rate (CPI)

Unit Labor Cost- Manufacturing and Real Worker Compensation (Non-farm Businesses): Annual Percent Change Relative to Same Period Last Year
Periods of rising real worker compensation can be inflationary unless labor productivity is rising sufficiently faster than the inflation rate to accommodate the gain in real compensation. We can see in the diagram that there were two prominent time periods since 1980 in which real worker compensation grew while unit labor costs remained relatively constant: from 1985-1987 and from 1996-1999. Recently, the two lines have had a closer correlation, perhaps suggesting that recent productivity gains are being reflected in rising compensation for workers. It is interesting to note that in mid and late 2002 real compensation increased while unit labor costs decreased, which suggests relatively strong productivity growth and low inflation. Part of this may also be due to fact that thousands of workers were laid off in the U.S. manufacturing sector in 2001 and 2002, which likely has contributed to the fall in unit labor costs in that sector.