U.S. Labor Share Falls 1.6 Points to Post-War Low as Within-Industry Shifts Drive Drop
Updated
Updated · Liberty Street Economics - · Jun 24
U.S. Labor Share Falls 1.6 Points to Post-War Low as Within-Industry Shifts Drive Drop
1 articles · Updated · Liberty Street Economics - · Jun 24
Summary
The U.S. labor share now sits 1.6 percentage points below its pre-pandemic level, marking the lowest reading in the post-war era after a renewed decline following COVID.
Fed researchers said the drop was driven mainly by within-industry changes—wages lagging productivity, prices, or both—rather than output shifting toward lower-labor-share sectors.
Sectoral reallocation did spike at the start of the pandemic, but it quickly moderated; a shift-share analysis found cross-industry moves contributed little or nothing to payroll-share declines in COVID, the GFC, and the dotcom downturn.
The post-COVID pattern otherwise looks historically familiar: labor share rose during the recession, fell in the recovery, and may need a longer expansion to rebound, unlike the steeper, unrecovered declines seen in the 2000s.