Bloomberg the Company & Products

Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Rising Labor Costs ‘Very Bad News for Profits’: Chart of the Day

Sept. 7 (Bloomberg) -- U.S. companies have reached a “tipping point” that will shrink earnings growth and profit margins, according to Albert Edwards, a global strategist at Societe Generale.

The shift has occurred because labor costs have started rising faster than prices as the economy struggles to expand, Edwards wrote yesterday in a report.

The CHART OF THE DAY illustrates how he reached this conclusion: by comparing the year-to-year percentage changes in unit labor costs and a business-price deflator. Both indicators are compiled by the Labor Department.

Average labor expense for every unit of output increased 1.9 percent last quarter from a year earlier, while the deflator for businesses other than farms rose 1.8 percent. The labor-cost gauge climbed more than prices for the first time since 2008.

“That is very bad news for profits,” Edwards wrote. It’s also “bad news for equities” and for the Federal Reserve, which may have to deal with accelerating inflation as companies seek to maintain margins by raising prices, he added.

Edwards has predicted the Standard & Poor’s 500 Index will drop to 400, a 66 percent plunge from yesterday’s close. He has also called for the yield on 10-year Treasury notes to drop to 1.5 percent, down from 1.97 percent yesterday.

To contact the reporter on this story: David Wilson in New York at

To contact the editor responsible for this story: Nick Baker at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.