The gradual decline in the unemployment rate over the past couple of years has generated a cyclical rebound in labour’s share of income, which we suspect has further to run. At first glance, this appears to be good for the economy (assuming that households are more likely to invest the redistributed income than businesses) but bad for equities. Unfortunately, there is a bigger problem. Labour may be getting a larger share of the economic pie at the expense of businesses, but that pie has been growing more slowly than before. The upshot is that households are also doing badly, just not quite as badly as businesses.
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