PLEASANT PRODUCTIVITY

25Q2 labor productivity growth was strong at 2.4% Y-o-Y. While 25Q1 was a dismal -1.8%, (the only negative reading since 22Q1) the latest result returns labor productivity growth to its post-pandemic 1.8% average. Strong productivity keeps inflation down despite good nominal compensation growth of 4%. 4%-2.4%=1.6% real labor cost growth, or 2.2% using the post-Covid average. These are well below the inflation rate, suggesting little if any wage inflation pressure.