Labor costs account for roughly 70% of firms’ production costs. For this reason, logic suggests that rising labor costs might signal potential inflation pressure should firms try to recoup labor cost increases by raising their product prices. However, measuring labor cost inflation is a challenge, and there are several ways to do it.
Suggested citation: “Labor Costs,” Federal Reserve Bank of Cleveland, Economic Trends, no. 06-03, pp. 12-13, 03.15.2006.