Unit labor costs in the US rose at nearly triple the initially reported rate during 2022’s final quarter, revised data released Thursday suggested.

Taken at face value, it wasn’t the best news for policymakers hoping to avert second-round inflation effects.

Early last month, BLS figures showed a 1.1% increase in unit labor costs for Q4, below consensus. It looked like more incremental evidence to suggest that despite an acute (and possibly endemic) labor shortage, the risk of a wage-spiral was perhaps abating.

With Thursday’s revisions, the picture is less clear. Q3’s ULC print was also revised higher, and by an even larger margin than Q4’s. The four-quarter rate now shows almost no moderation whatsoever during Q3 and Q4.

The originally reported 3% increase in productivity for Q4 was revised down to 1.7%, well below the 2.5% economists expected, and nearly matching the lowest estimate. In Q1 of 2022, productivity plunged by the most in almost 80 years. Q2’s drop was smaller, but still counted among the largest in modern US history.

As a reminder, it’s the juxtaposition between falling productivity and surging wages that pushes unit labor costs higher. So, the downward revision to productivity went hand in hand with the upward revision to unit labor costs — and vice versa. That’s not a constructive development for the Fed.

On a YoY basis, productivity fell 1.8% in Q4, Thursday’s revisions showed, worse than the initially reported 1.5%. It was the fourth consecutive quarter during which productivity declined when measured versus the same period from the prior year. That’s only happened one other time — in 1974. It almost happened in 1980 and then nearly again in 1982.

All of the revisions were in the “wrong” direction. Output rose by less than initially reported, compensation was higher but real compensation rose by less than the preliminary estimate and the price deflator was revised up. The report was influenced by a large increase in the number of hours worked.

For the full year, productivity dropped the most since 1974, while labor costs showed the biggest increase in 40 years.

Meanwhile, separate data on Thursday showed initial jobless claims spent a seventh week below 200,000, while continuing claims for the prior week came in well below estimates.

Bottom line: The labor market is tight. There’s no evidence to suggest otherwise. That, in turn, points to a more hawkish Fed and a macro regime shift which still feels underappreciated and quite possibly mispriced.