Growth in US labour costs slows in Q3

[WASHINGTON] US labour costs increased slightly less than expected in the third quarter as a softening labour market curbed wage growth, which bodes well for services inflation.

The Employment Cost Index (ECI), the broadest measure of labour costs, rose 0.8 per cent in the last quarter, after gaining 0.9 per cent in the second quarter, the Labor Department’s Bureau of Labor Statistics said on Wednesday (Dec 10). Economists polled by Reuters had forecast the ECI advancing 0.9 per cent.

Labour costs increased 3.5 per cent in the 12 months through September after rising 3.6 per cent in the year through June.

The report was delayed by the 43-day government shutdown, which ended last month.

The ECI is viewed by policymakers as one of the better measures of labour market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.

While the moderation suggested wages posed no threat to inflation, price pressures remain elevated because of tariffs on imports. Cooler wage growth could also hamper consumer spending.

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US job openings increase modestly in October

Federal Reserve officials are expected to cut the US central bank’s benchmark overnight interest rate by another 25 basis points to the 3.50 per cent-3.75 per cent range at the end of a two-day meeting later out of concern for the labour market.

The Fed has lowered borrowing costs twice this year.

Wages and salaries, which account for the bulk of labour costs, rose 0.8 per cent last quarter after increasing 1.0 per cent in the April-June quarter. They increased 3.5 per cent on an annual basis. When adjusted for inflation, overall wages rose 0.6 per cent in the 12 months through September after advancing 0.9 per cent in the second quarter. REUTERS