Today’s news that unit labour costs in the US nonfarm business sector grew at a near double-digit annual pace in Q2 2022, as soaring wages interacted with negative productivity growth, hasn’t ruffled the stock market much. That may be because of question marks about its accuracy in light of wedges between data on expenditure, income and employment, and because investors are fixated instead on what tomorrow’s timelier consumer price report for July will reveal about inflation. Nonetheless, when unit labour costs last grew so rapidly, in the 1970s, it was a bad time for equities partly because they squeezed profits. That is a risk today.
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