Tuesday, February 24, 2015

Labor and Nonlabor Costs

The best match I could find is for nonfinancial corporations -- unit labor costs and unit nonlabor costs for nonfinancial corporations. These two series:

Graph #1: Unit Labor Costs (red) and Unit Nonlabor Costs (blue)

BLS points out that

Unit nonlabor costs include consumption of fixed capital, taxes on production and imports less subsidies, net interest and miscellaneous payments, and business current transfer payments.

Both data series are indexed to 2009=100. That's why the two lines meet in 2009 on Graph #1. And that's why their ratio has the value 1.0 in 2009, on Graph #2:

Graph #2: Unit Labor Costs relative to Unit Nonlabor Costs
Graph #2 shows Unit Labor Costs falling relative to Unit Nonlabor Costs. It's all downhill. By the end, labor costs are about half what they were at the start -- as compared to nonlabor costs.

That's pretty outrageous, I think, especially considering that "Economists view increases in unit labor costs as an important indicator of potential inflation."

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