Econoday | Resource Center | Fed Watching Indicators

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Short Term Perspective
Nonfarm productivity increased at a healthy 3.3 percent rate in the third quarter, while unit labor costs increased at a 2.9 percent rate. On a year-over-year basis, productivity gains are still running at high levels. At the same time, the yearly change in unit labor costs edged up 0.2 percent, still not a bad showing for this stage of the business cycle. This news should be friendly for Fed officials worried about the impact of tight labor markets on wage and price inflation.

Long Term Perspective
While accelerating wage gains could lead to consumer price increases, it is important to look at the missing link -- productivity. Productivity gains allow wage increases without generating inflationary pressures. Note how sharp productivity increases since 1991 were associated with modest gains (and even declines) in unit labor costs.

Alternative Inflation Measures • Gold Prices • Employment Cost Index • Civilian Unemployment Rate

Pool of Available Labor • Nonfarm Productivity • Treasury Yields • Stock Prices • Humphrey-Hawkins Actions