{"id":524464,"date":"2022-12-09T14:00:00","date_gmt":"2022-12-09T11:00:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/labor-costs-point-to-corporate-profit-as-main-inflation-driver\/"},"modified":"2022-12-09T14:00:00","modified_gmt":"2022-12-09T11:00:00","slug":"labor-costs-point-to-corporate-profit-as-main-inflation-driver","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/labor-costs-point-to-corporate-profit-as-main-inflation-driver\/","title":{"rendered":"#Labor costs point to corporate profit as main inflation driver"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3df41c7cdbf\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3df41c7cdbf\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/labor-costs-point-to-corporate-profit-as-main-inflation-driver\/#Labor_costs_point_to_corporate_profit_as_main_inflation_driver\" >Labor costs point to corporate profit as main inflation driver<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"Labor_costs_point_to_corporate_profit_as_main_inflation_driver\"><\/span>Labor costs point to corporate profit as main inflation driver<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2022\/12\/NYSE_markets_051922_AP_Seth-Wenig.jpeg?w=900\" \/><\/p>\n<div>\n<p>The continued drop in labor costs has economists pointing to private sector profits as a main driver of inflation, undercutting arguments from the Federal Reserve regarding its plan to bring down consumer prices that remain around 40-year highs.<\/p>\n<p>Unit labor costs, which are measured by the Labor Department to determine how much businesses are paying for workers to produce their goods and services, have been getting outpaced by profits over several quarters, leading economists to call out a trend.<\/p>\n<aside class=\"ad-unit ad-unit--mr1_ab\"><\/aside>\n<p>Paul Donovan, an economist with Swiss Bank UBS, wrote in a note to investors saying that Wednesday\u2019s labor cost numbers showed again that corporate profits are rising faster than labor costs.\u00a0<\/p>\n<p>\u201cToday\u2019s inflation is more about margin expansion than labor costs,\u201d he wrote. Earlier this week, Donavan said the slowing labor cost growth underscored \u201chow little of the current inflation is labor related.\u201d<\/p>\n<p>That\u2019s a very different argument from the one put forward by many U.S. policymakers, both in the political and economic sectors.<\/p>\n<p>Speaking on CNBC Thursday morning, Rep. Kevin Brady (Texas), the top Republican on the Ways and Means committee, sounded a familiar refrain, arguing the labor situation in the U.S., which has been characterized by a tight job market and rising nominal wages, was behind lingering consumer inflation.<\/p>\n<p>\u201cBoth the White House and the Fed don\u2019t understand the worker crisis we\u2019re in and how that\u2019s driving higher prices persistently for a long time, as well,\u201d Brady said.<\/p>\n<p>Ways and Means Republicans have gone so far as to blame inflation on a \u201cwage-price spiral,\u201d the mutually reinforcing pressure of wages on prices and vice versa that led the Nixon administration to freeze both for 90 days during high inflation in the 1970s.<\/p>\n<aside class=\"ad-unit ad-unit--mr2_ab\"><\/aside>\n<p>\u201cThe dangerous wage-price spiral created by President Biden\u2019s poor economic policies ensures high and persistent inflation for the future,\u201d Brady said in a statement earlier this month. \u201cThe White House is absolutely clueless about the very real labor shortage still hurting Main Street businesses and driving prices higher.\u201d<\/p>\n<p>At their latest meeting in November, Federal Reserve bankers disagreed, saying that a wage-price spiral \u201chad not yet developed.\u201d They noted that \u201congoing tightness in the labor market could lead to an emergence\u201d of one, but this week\u2019s loosening unit labor cost data could make that less likely.<\/p>\n<p>Despite the Fed\u2019s observation that a wage-price spiral has yet to occur, the central bank hasn\u2019t been shy about linking the effects of wages upon inflation.<\/p>\n<aside class=\"ad-unit ad-unit--mr3_ab\"><\/aside>\n<p>Bankers assessed in their November meeting that \u201cthe factors that had boosted inflation since the middle of last year\u2014most notably, strong wage growth and the effect of supply constraints on prices\u2014would persist for longer than previously thought.\u201d<\/p>\n<p>But a November research paper from the Bank of International Settlements (BIS) \u2013 sometimes referred to as the central bank for central banks \u2013 downplayed this relationship in the global economy. BIS found that even when wage-price spirals do take hold in advanced economies, they don\u2019t typically spiral out of control, running counter to their name and to the Nixon-era example that made them famous. Rather, they tend to peter out.<\/p>\n<p>\u201cSurprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged,\u201d BIS researchers found.<\/p>\n<aside class=\"ad-unit ad-unit--mr4_ab\"><\/aside>\n<p>\u201cWhen focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow \u2013 thus allowing real wages to catch up. We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold,\u201d the researchers said.<\/p>\n<p>Such findings put the focus back on profits as a reason that inflation may be proving sticky. But economists caution that profits in some sectors of the economy are contributing more to inflation than profits in other sectors, and that ascribing the effect of profits upon inflation uniformly misses the mark.<\/p>\n<p>\u201cThere are some corporations that are earning extraordinary profits right now. That\u2019s even a technical term \u2013 \u2018extraordinary.\u2019 That\u2019s like oil and gas and meatpacking,\u201d Claudia Sahm, former Federal Reserve banker and founder of Sahm Consulting, said in an interview.<\/p>\n<p>\u201cBut a lot of small business owners are getting crushed. Everything they need to put stuff on the shelves has gone up in price. They\u2019re not making a lot in profits, and they\u2019re a very important part of the economy. So I don\u2019t like to lump everybody together.\u201d<\/p>\n<p>Economists have expressed doubts about whether interest rate hikes can address profit-driven inflation, even though it might not be evenly distributed across industries and economic sectors.<\/p>\n<p>\u201cSince the labor share [of inflation] is declining and it\u2019s coming from profits, it\u2019s hard for the Fed to have policies that can address that. Raising interest rates don\u2019t rein those things in,\u201d Bill Spriggs, chief economist with the AFL-CIO labor union federation, told The Hill.\u00a0<\/p>\n<p>Spriggs said that higher rates may in fact be working in the opposite direction.<\/p>\n<p>\u201cThey can set a certain mentality, particularly with the way the Fed is talking about things. The Fed is suggesting that it would tolerate a recession in order to lower prices. If I\u2019m a business person, why would that make me want to lower prices and drop my profits now, since you\u2019re telling me that next quarter I\u2019m going to start losing money?\u201d he said.<\/p>\n<p>More targeted proposals to fight inflation and price increases by businesses have been advanced by Democrats in recent months, mainly in the form of windfall profits taxes on the oil sector, which the United Nations has singled out as a primary source of commodity inflation.<\/p>\n<aside class=\"ad-unit ad-unit--mr5_ab\"><\/aside>\n<p>One such proposal was put forward in California this week by Gov. Gavin <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a>om (D).<\/p>\n<p>\u201cCalifornia\u2019s price gouging penalty is simple \u2014 either Big Oil reins in the profits and prices, or they\u2019ll pay a penalty,\u201d Newsom said in Monday statement. \u201cBig Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the legislature to get this done.\u201d<\/p>\n<p>Democrats Rep. Ro Khanna (Calif.) and Sen. Sheldon Whitehouse (R.I.) have their own similar proposal on the national level, which would levy a tax on the difference between the current price of oil per barrel and the average cost between 2015 and 2019.\u00a0<\/p>\n<p>\u201cBig corporations, especially Big Oil, are using inflation as an excuse to gouge consumers, hoard record profits, and raise CEO pay and bonuses. We\u2019ve got to protect hardworking Americans from corporate profiteering, and passing my bill to claw back Big Oil windfall profits is the right place to start,\u201d Whitehouse said in a statement to The Hill.<\/p>\n<aside class=\"ad-unit ad-unit--mr6_ab\"><\/aside>\n<p>Brady said in an October statement that any \u201cso-called windfall profits tax would slash production, raise prices on American families, make [the] U.S. more dependent on foreign oil.\u201d<\/p>\n<p>\u201cWe\u2019ve seen this mistake before,\u201d he said. \u201cThis is a Carter-era tax hike that slashed production while making the U.S. more dependent on foreign oil. This couldn\u2019t come at a worse time for American families suffering under 40-year high inflation, who are on track to pay the highest prices to keep their homes warm in 25 years.\u201d\n<\/p><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/thehill.com\/policy\/finance\/3767772-labor-costs-point-to-corporate-profit-as-main-inflation-driver\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Labor costs point to corporate profit as main inflation driver The continued drop in labor costs has economists pointing to private sector profits as a main driver of inflation, undercutting arguments from the Federal Reserve regarding its plan to bring down consumer prices that remain around 40-year highs. Unit labor costs, which are measured by&#8230;<\/p>\n","protected":false},"author":1,"featured_media":524465,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2022\/12\/NYSE_markets_051922_AP_Seth-Wenig.jpeg?w=1280","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[134418,137031,134353,70550,70551,124783,137032,137033,115,134590,134591,134419,70289],"class_list":["post-524464","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-congress-blog","tag-corporate-profits","tag-court-battles","tag-federal-reserve","tag-inflation","tag-international","tag-kevin-brady","tag-labor-costs","tag-news","tag-overnight-energy-environment","tag-overnight-finance","tag-overnight-technology","tag-senate"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/524464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=524464"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/524464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/524465"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=524464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=524464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=524464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}