OUCH!! Unit Labor Costs Up 5%

This morning the Department of Labor reported that  second quarter unit labor costs rose 5% over the past year.  This is clearly not good news on the inflation front. Higher labor costs are ultimately passed through to consumers in the form of higher prices for goods and services (inflation!) or absorbed in the company's profit margins (lower earnings!).  Either way, this is not good news for stocks or bonds and we've seen markets sell off in pre-open trading today.

But don't give up hope.  There was some positive news in the release.  Most importantly, productivity improved in the second quarter increasing 1.6%.  Higher productivity helps to offset rising labor costs and keeps inflation pressures in check.