The chart below shows that labor’s share and capacity utilization often move in opposite directions because higher utilization today tends to amplify capital’s pricing power rather than labor’s bargaining leverage.
In the late 1990s, utilization pushed above 83% while labor’s share drifted down, as globalization and lean supply chains let businesses capture demand without raising pay. The 2009–2015 recovery tells the same story: plants came back online, though efficiency gains and automation kept wages from rising proportionately, driving labor’s slice lower. And the current divergence is even starker.
In all, what looks like an inverse correlation is really a structural shift. Industrial tightness that once lifted pay now deepens the channel to profits.
h/t MonetaryCommentary