Chicago Fed, Report: Unit Labor Costs and Inflation in the Non-Housing Sector

“Finally, since growth in unit labor costs does not predict inflation, one has to be careful in using unit labor costs to identify inflationary pressures. Given the lagging nature of unit labor costs, using the slowdown in the growth in unit labor costs to identify when inflationary pressures have abated may overestimate the point at which inflationary pressures truly eased.”