The growth in Unit Labor Costs, however, was more contained at 0.4% in Q4 2023. This rise, attributed to a 3.6% increase in hourly compensation, was somewhat moderated by the concurrent rise in productivity. Over the last four quarters, Unit Labor Costs have increased by 2.5%, indicating sustained pressure on wages but balanced by productivity gains.
In the manufacturing sector, a mixed picture emerged. While productivity in the broader manufacturing sector increased modestly, durable manufacturing experienced a decline, indicative of sector-specific challenges.
Fed Policy Implications
The resilience in productivity growth, coupled with moderate increases in Unit Labor Costs, paints a picture of an economy that is managing wage pressures effectively without significant inflationary implications. This balance is crucial for the Federal Reserve as it navigates its dual mandate of price stability and maximum employment.
Given…
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