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US labor costs post largest annual gain since 2008

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US labor costs increased in the second quarter as employers boosted benefits for workers, leading to the largest annual increase since 2008.

[WASHINGTON] US labor costs increased in the second quarter as employers boosted benefits for workers, leading to the largest annual increase since 2008.

The Employment Cost Index, the broadest measure of labor costs, rose 0.6 per cent after an unrevised 0.8 per cent advance in the first quarter, the Labor Department said on Tuesday.

Labor costs increased 2.8 per cent year-on-year, the biggest annual gain since September 2008 and followed a 2.7 per cent advance in the first quarter.

Economists polled by Reuters had forecast the ECI rising 0.7 per cent in the April-June quarter.

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Wages and salaries, which account for 70 per cent of employment costs, rose 0.5 per cent in the second quarter. They increased 0.9 per cent in the first three months of the year.

Wages and salaries were up 2.8 per cent in the 12 months through June, also the biggest annual gain since September 2008. Economists expect a significant acceleration in wage growth in the second half of the year, boosted by a tightening labor market. The labor market is considered to be near or at full employment, with a 4 per cent jobless rate.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. It is also considered a better predictor of core inflation. Economists say labor costs need to rise by at least 3 per cent to lift inflation to the U.S. central bank's 2 per cent inflation target.

Private sector wages and salaries rose 0.6 per cent in the second quarter. They were up 2.9 per cent in the 12 months through June after a similar gain in the year to March.

Benefits for all workers increased 0.9 per cent in the April-June quarter, the biggest gain in four years, after rising 0.7 per cent in the first quarter. They were up 2.9 per cent in the 12 months through June, the largest increase December 2011, after rising 2.6 per cent in the year to March.

REUTERS