• Unit Labor Costs in the US increased at a stronger pace than expected in Q1.
• US Dollar Index turns positive after the report rising above 101.50.

“Unit labor costs (ULC) in the nonfarm business sector increased 6.3% in the first quarter of 2023, reflecting a 3.4% increase in hourly compensation and a 2.7% decrease in productivity. Unit labor costs increased 5.8% over the last four quarters”, the US Bureau of Labor Statistics (BLS) reported on Thursday. The increase in ULC was higher than the 5.5% increase expected.

“Nonfarm business sector labor productivity decreased 2.7% in the first quarter of 2023, the US Bureau of Labor Statistics reported today, as output increased 0.2% and hours worked increased 3.0%. From the same quarter a year ago, nonfarm business sector labor productivity decreased 0.9%, reflecting a 1.3% increase in output and a 2.3% increase in hours worked.”

“The 0.9% productivity decline is the first time the four-quarter change series has remained negative for five consecutive quarters; this series begins in the first quarter of 1948.”

Market reaction

The US Dollar rose across the board after the report. The DXY climbed above 101.50 while EUR/USD tumbled toward 1.1020 as traders await European Central Bank President Lagarde press conference.