Bitcoin rates backdrop: US Q3 productivity up 3.6%, outpacing 2.9% wage growth
In brief
- Q3 productivity rose 3.6% vs. 2.9% for hourly compensation; unit labor costs fell 0.7%, preliminary BLS data show.
- Unit labor costs remained 2.4% higher than a year earlier.
- October payrolls rose 165,000; hourly earnings were up 3.1% year over year.
- FOMC held rates at 3.75% to 4.00% on October 28 in a 10-2 vote.
- CryptoSlate's Liam Wright linked easing inflation pressure to a possible rates tailwind for Bitcoin.
What the BLS numbers showed
Output rose 3.7% in Q3 while hours worked rose just 0.1%, per the preliminary BLS figures cited by CryptoSlate. These are quarterly changes at seasonally adjusted annualized rates, and they aren't consumer-price inflation readings. The BLS calculates unit labor costs by dividing hourly compensation by productivity, so when each hour produces more, businesses can pay more per hour without the cost measure climbing in step.
That's what happened in Q3. Productivity grew faster than pay.
It's not the full picture, though. Nonfarm business unit labor costs remained 2.4% higher than a year earlier.
Payrolls and the Fed
The BLS's November 6 employment report, as cited by CryptoSlate, showed October payrolls increased by 165,000, well above the prior 12 months' average monthly gain of 48,000. Average hourly earnings for private nonfarm employees rose 0.4% over the month and 3.1% over the year.
It's tempting to net those wage figures against the productivity print. That doesn't work. Third-quarter productivity doesn't show how productive workers were in October, and an annualized quarterly rate can't simply be subtracted from monthly earnings growth, CryptoSlate noted.
On October 28, before either November labor release, the Federal Open Market Committee held its target range at 3.75% to 4.00% in a 10-2 vote, CryptoSlate reported. Lisa Cook and Beth Hammack preferred a quarter-point rate increase, according to the report. The Fed's statement, as cited by CryptoSlate, described productivity growth as strong while calling inflation elevated.
Wright's read on Bitcoin
Productivity can absorb higher pay; quarterly labor-cost relief does not settle the inflation outlook.
In Wright's analysis, a sustained decline in inflation pressure could ease a potential rates headwind for Bitcoin if it brings lower expected rates and funding costs. He also said persistent inflation or upward labor-cost revisions would weaken the case for relief in Bitcoin prices.
The Q3 figures are preliminary, so revisions are part of the story from here.
Frequently asked questions
How do unit labor costs relate to productivity and wages?
The BLS calculates unit labor costs by dividing hourly compensation by productivity. In the preliminary Q3 data, productivity rose 3.6% while hourly compensation rose 2.9%, and unit labor costs fell 0.7%, all at seasonally adjusted annualized rates.
Can Q3 productivity be subtracted from October wage growth?
No. Third-quarter productivity doesn't show how productive workers were in October, and its annualized rate can't simply be subtracted from monthly earnings growth. October average hourly earnings rose 0.4% on the month and 3.1% on the year.
Why did CryptoSlate link the labor data to Bitcoin?
CryptoSlate's Liam Wright argued that a sustained decline in inflation pressure could ease a potential rates headwind for Bitcoin if it brings lower expected rates and funding costs. He said persistent inflation or upward labor-cost revisions would weaken that case.
