One reason earnings might look better… labor share dropped

The stock market is rising again on some positive earnings being reported. One reason for the nice earnings could be found in another number… the labor share index.

The number for the labor share index, 4th quarter 2013, came out today. It dropped to 95.5… its lowest level since the 1940’s. So if we see stocks rebound due to earnings looking good, there is another side to the story. Labor’s share of the national income produced during the¬†Christmas season had to take a hit to boost those earnings. We can expect demand to be weaker in 2014… unless labor share rebounds and then profits take a hit.¬† (link to chart)

Update: My calculations show that that capital income grew $444 billion from 4th quarter 2012 to 4th quarter 2013. While labor income fell by $12 billion.

4Q13 labor share