Unit Labor Costs Decline YoY To -0.2% As U-3 Unemployment Hits 4.4% (Phillip’s Milk of Magnesia Curve)

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Today, US Unit Labor Costs Nonfarm Business Sector QoQ % SAAR was reported for Q2 FINAL. It declined 0.2% from 0.6% in Q1.

Aren’t we in a supposed tight labor market when wages (and labor costs) should be rising? That is the prediction of The Phillips Curve. But somehow it isn’t happening.

Unit labor costs YoY fell to -0.20% while U-3 unemployment is at 4.4%. This is the “Phillips Milk of Magnesia Curve” because it is giving Fed Chair Janet Yellen and my friend Raphael Bostic (Fed of Atlanta President and CEO) acid indigestion.

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With labor costs declining -0.2% YoY and home prices rising 5.65% YoY, Congress we have a problem.

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Here is another view of the Phillip’s Milk of Magnesia curve.

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Janet Yellen and her bottle of Phillip’s Milk of Magnesia.

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