Layoffs, wages, and labor costs: three measures of the labor Boom

Layoffs, wages, and labor costs: three measures of the labor Boom, New Deal democrat

Initial claims declined another 14,000 this week to 269,000, and the 4 week average declined 15,000 to 284,750, both new pandemic lows:

For the past 50 years, initial claims have only been at these levels briefly at the peak of the late 1990’s tech boom, and from 2015 to just before the pandemic in 2020.

Continuing claims also declined 134,000 to 2,105,000, also a new pandemic low:

This is very close to the cutoff line of 2,000,000 which has epitomized peak economic expansions in the past 50 years, as shown in the below graph which subtracts 2,000,000 from the reported numbers:

For all intents and purposes, nobody is getting laid off.

This tightness in the labor market means that workers are also commanding a bigger share of the fruits of their labor.  Unit labor costs (how much compensation has to be paid workers per unit of output) increased 2.0% in Q3 alone. This level of increase only occurred 7 times between the modern labor era dating to 1982 and the pandemic:

YoY unit labor costs are up 4.8%, which only occurred 4 times since 1982 before the pandemic:

While in the financial press unit labor costs are frequently bemoaned because they lessen potential profits to companies, since laborers have been largely cut out of productivity improvements since trade with China was opened in 1999, any return to a more equitable share is a good thing.

Finally, the employment cost index was reported for Q3 one week ago. I didn’t note it then, but it also showed labor costs increasing sharply, a new record at a 1.6% increase in one quarter alone:

The YoY increase of 4.6% was also a record:

What is noteworthy about the ECI is that it tracks compensation *normalized for the type of job,* i.e., it isn’t influenced by a different mix of high wage vs. low wage jobs. Dishwashers are compared with dishwashers, and so on.

The recovery from the pandemic has been the best time to be a worker since the late 1990s Boom.