September 5th, 2024 - Volume 10 (2024), Missive 202 (Thursday)
Labor’s share sets new 76 year low
Quality of income falling much faster than quantity is rising
The Fed has yet to fully grasp just how devastating this economic carnage is
Surplus productivity makes labor increasingly cheaper relative to the potential of the output it produces. It is a relatively devastating economic fundamental when left to its own devices and, as with the case of labor’s share of income, it becomes impossible to ignore. Today’s labor force productivity data does just that as the index that measures labor’s share of income produced another lower revision, adding to a chain of data that has been revised lower over the course of the past few years. More importantly, given that the index was already sitting on a 76 year low prior to today’s release, it also means that today sets another new historical low on one of the most critical sets of economic data the economy has. This development in new in some regards and not so new in others. No matter the case, it has, by far and away, the most significant consequences for the economy and the markets that measure it.
Labor’s share of income has never been lower.
First of all, labor’s share of income has certainly trended lower over the decades. However that pace of diminishing returns was quite slow and controlled. In fact, from QII 1949 to QI of 2001, the index value of labor’s share of income fell, in total, 0.63 percent. By way of comparison, labor share has dropped 14.32 from QI 2001 to QII 2024; an absolutely enormous drop that is unlike anything the economy
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