Thursday, November 3, 2016

When Labor Share Stops Going Down, Employment Growth Stops Going Up

Labor Share (blue) and the Growth of Employment (red)
Click Graph to Enlarge the Image
As long as labor is getting a smaller share, capital is getting a bigger share, so faster employment growth boosts profit. Then, when labor share stops decreasing, faster employment growth no longer boosts profit.


Oilfield Trash said...

So "Your workers are your customers. While they may be a cost at work, they are a source of revenue as consumers." is empirically supported.

The Arthurian said...

"... profit margins have been higher and more resilient in this cycle than in prior economic cycles. Again, this elevation of profit margins is a mirror image of slack labor markets and weak growth in wages and salaries. The relationship isn’t perfect, as a result of quarter-to-quarter volatility, but the inverse relationship between the two is clear."

His graph shows great similarity across three peaks (1997-2018) between "Wage and salary compensation as a percentage of GDP" and "U.S. corporate profits as a percentage of corporate revenues (inverted)"