You are here
US second-quarter labour costs gain smallest in 1-1/2 years
[WASHINGTON] US labour costs rose at their slowest pace in 1-1/2 years in the second quarter, the latest indication of benign inflation that could allow the Federal Reserve to cut interest rates on Wednesday for the first time in a decade.
The Employment Cost Index, the broadest measure of labor costs, increased 0.6 per cent, the smallest gain since the fourth quarter of 2017, the Labour Department said on Wednesday. The ECI had increased 0.7 per cent for two straight quarters.
In the 12 months through June, the ECI rose 2.7 per cent, slowing from a 2.8 per cent increase in the year through March.
Economists polled by Reuters had forecast the ECI would rise 0.7 per cent in the April-June period.
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. Labor costs picked up over 2018 as a tightening labor market pushed up wage growth. The pace of increases has since moderated somewhat.
The report came on the heels of data on Tuesday showing a key measure of inflation increased 1.6 per cent in the 12 months to June, continuing a pattern of slow gains that have seen it undershoot the Fed's 2 per cent target this year.
Tame inflation and slowing economic growth are expected to encourage US central bank officials to cut rates when they conclude a two-day policy meeting later on Wednesday.
The economy, which is cooling as the boost from last year's US$1.5 trillion tax cut package fades, is facing headwinds from a bitter trade war between the United States and China, slowing global growth and Britain's potential disorderly departure from the European Union.
In the second quarter, wages and salaries, which account for 70 per cent of employment costs, rose 0.7 per cent after rising by the same margin in the prior period. Wages and salaries were up 2.9 per cent in the 12 months through June, matching the gain in the year through March.
Private sector wages and salaries rose 0.6 per cent in the second quarter after increasing 0.7 per cent in the first quarter. They were up 3.0 per cent in the 12 months through June after rising by the same margin in the year through March.
State and local government wages and salaries rose 0.5 per cent after advancing 0.6 per cent in the first quarter.
Benefits for all workers rose 0.5 per cent in the April-June quarter, slowing from the first quarter's 0.7 per cent rise. The moderation reflected a 0.4 per cent decline in benefits in the natural resources, construction and maintenance industry.
Benefits in the manufacturing industry rose only 0.5 per cent after surging 0.9 per cent in the first quarter.
Overall, benefits were up 2.3 per cent in the 12 months through June, the smallest gain since March 2017, after rising 2.6 per cent in the year through March.