Labour Costs Show Surprise Decline In The Third Quarter

• In the third quarter, unit labour costs unexpectedly declined, providing some relief on the inflation front. Unit labour costs, which measure hourly compensation against productivity, fell by 0.8% on a seasonally adjusted basis. Economists had anticipated a gain of 0.7%. Over the 12 months, unit labour costs increased by 1.9%.
• The decline in unit labour costs was influenced by a 3.9% increase in hourly compensation, which was offset by a 4.7% rise in productivity. The productivity increases surpassed expectations, with output rising by 5.9% and hours worked increasing by 1.1%.
• These developments occurred as the Federal Reserve was actively trying to combat inflation by implementing a series of interest rate increases. Fed Chair Jerome Powell noted that wage gains have decreased significantly over the past 18 months, bringing them closer to the target of 2% inflation over time.
• In other economic news, initial filings for unemployment benefits for the week ending on October 28 reached 217,000, representing a slight increase of 5,000 from the previous week and higher than the estimated 214,000. Continuing claims, which lag by a week, totalled 1.82 million, reflecting an increase of 35,000 and exceeding the estimated 1.81 million.