U.S. labor costs solid in Q3; private wage growth slowing
U.S. labor costs increased solidly in the third quarter, but private sector wage growth slowed considerably, suggesting inflation had either peaked or was close doing so.
The Employment Cost Index, the broadest measure of labor costs, rose 1.2% last quarter after increasing 1.3% in the April-June period, the Labor Department said on Friday.
Economists polled by Reuters had forecast the ECI rising 1.2%. Labor costs increased 5.0% on a year-on-year basis after advancing 5.1% in the second quarter.
The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation, because it adjusts for composition and job-quality changes. It is being watched for confirmation that wage growth has peaked as economists try to gauge when the Federal Reserve will start slowing its aggressive interest rate hikes.
The U.S. central bank has raised its benchmark overnight interest rate from near zero in March to the current range of 3.00% to 3.25%, the swiftest pace of policy tightening in a generation or more.
Annual growth in average hourly earnings in the Labor Department’s monthly employment report is cooling. The Atlanta Fed’s wage tracker has also moderated in recent months. While the Fed’s “Beige Book” report last week showed “wage growth remained widespread,” in early October, it noted that “an easing was reported in several districts.”
There were 10.1 million job openings on the last business day of August, with 1.7 open positions for every unemployed person.
Wages and salaries increased 1.3% last quarter after rising 1.4% in the second quarter. They were up 5.1% year-on-year after rising 5.3% in the prior quarter. Private sector wages rose 1.2%, stepping down from a 1.6% jump in the second quarter. Private industry wages rose 5.2% year-on-year after increasing 5.7% in the second quarter.
State and local government wages increased 2.1% after rising 0.7% in the second quarter.
But inflation eroded the gains for employees. Inflation adjusted wages for all workers dropped 3.0% year-on-year.
Benefits rose 1.0% last quarter after increasing 1.2% in the April-June quarter. They were up 4.9% year-on-year.