U.S. labor market tightness may cause higher wage rate

The final estimate of Q3 productivity and unit labor costs in the United States revised up productivity growth of the economy. Productivity, measured as per hour nonfarm business output, is now expected to have increased by 2.2% quarter on quarter saar against the initial estimation of 1.6% in Q3. Similarly, on a year on year basis, the productivity is expected to have grown at 0.6%  vs initial 0.4% during the same quarter.

Based on the revised estimation, the real compensation might have increased by 2.4% q/q saar against initial estimation of 1.4% and 3.6% y/y against 2.4% in Q3.

"On balance, we view the revisions to compensation growth in this morning's report as encouraging. Labor market tightness may finally be starting to lead to an uptick in wage growth; however, this indication is tentative as of yet. Productivity, on the other hand, has to recovery from five years of subpar growth, and we see little evidence of a substantial pickup coming in the near future", says Barclays in a research note on Wednesday.