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 (or the cost of worker benefits) 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, 2002, and 2004. Falling unit labor costs lately reflect unusually strong productivity growth, which has helped strengthen economic growth.

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 (or the cost of worker benefits) 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, which in turn leads to higher prices and additional pressure for an increase in compensation. Since the recession of 2001, unit labor cost growth has generally been lower than the overall consumer-price inflation rates. It is likely that productivity growth and global competition has helped contain growth in unit labor costs in the manufacturing sector, and that other factors such as energy prices and healthcare have had the more significant impact on inflation.

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. Those were periods of strong economic growth. We can also see that during times of high inflation, such as 1980-1981, high rates of growth in unit labor costs are necessary to maintain modest growth in real compensation. We can see the possible influence of rising labor productivity in the last two quarters of the 2006 data, which reveal rising real worker compensation and falling unit labor costs.