US labor costs rise at the end of 2024

Labor costs in the US turned higher in the fourth quarter of 2024, as wage growth outpaced productivity gains. This trend indicates that inflationary pressures from the labor market in the world’s largest economy may continue.

Official data issued today, March 6, showed that US labor costs rose by 2.2% quarter-on-quarter (QoQ) and 2% year-on-year (YoY) in Q4 2024, compared to a revised 1.2% decline in the previous quarter.

The increase in labor costs resulted from a 3.8% rise in average hourly earnings, while productivity increased by only 1.5%.

Labor productivity in the US industrial sector edged up by 0.3%, reflecting a 1.3% decline in total output and a 1.6% drop in total working hours.

These figures indicate a slowdown in production momentum within the US economy amid rising wages, signaling a potential contraction in the supply of goods and services while demand remains strong. This dynamic could further intensify inflationary pressures stemming from labor market trends.

The data comes after a separate report revealed that US layoffs surged last month to their highest level since 2020, possibly indicating that American businesses are facing mounting cost pressures.

Investors now await the release of the US Labor Department's monthly jobs report tomorrow, with forecasts suggesting that the economy added 156,000 jobs in February, compared to 143,000 in January.