Everyone watches CPI. Almost nobody watches Unit Labour Costs (ULC) — and that’s exactly why most traders are caught off guard when inflation refuses to die.
Here’s what the latest data is telling us:
🔴 US NONFARM ULC — SPIKING ULC surged at a 5.7% annualised rate in Q1 2025 — wages rising faster than output per worker. Manufacturing ULC posted its biggest spike since the 2022 inflation peak.
🔴 EMPLOYMENT COST INDEX — STICKY Running at 3.4% year-over-year — well above the Fed’s 2% inflation target. Benefit costs are now growing faster than wages for the first time in a decade.
🔴 CORPORATE MARGINS — UNDER PRESSURE More than 4 in 10 goods-sector CFOs reported shrinking margins in 2025. As pre-tariff inventory runs out in H2 2026, the real squeeze begins.
🔴 THE FED — HIGHER FOR LONGER Rates held at 3.50%-3.75% on April 29. Core PCE still at 3.0%. J.P. Morgan’s base case: no cuts in 2026, possible hike in 2027.
📌 When labour costs per unit stay elevated, companies either eat the loss or raise prices. Either way — margins compress or inflation persists. Most of the market is still not positioned for that.
The trades that outperform are the ones built on data others overlook. 👇
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📊 UNIT LABOUR COSTS: THE INFLATION SIGNAL TRADERS KEEP MISSING was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
