US Posts a Modest Rise in Fourth-quarter Labour Costs

Filed in News by on January 31, 2017

US Posts a Modest Rise in Fourth-quarter Labour Costs.

US Posts a Modest Rise in fourth-quarter Labour Costs – Despite a moderate rise in employment costs in the US there are signs of wage growth accelerating as companies seek to retain and attract skilled workers.

US Posts a Modest Rise in fourth-quarter Labour Costs

Washington — US labour costs rose less than expected in the fourth quarter, pointing to low inflation despite talk of pay growth picking up as the labour market tightens.

The employment cost index (ECI), the broadest measure of labour costs, firmed 0.5% after rising 0.6% in the third quarter, labour officials said on Tuesday.

That slowed the year-on-year rate of increase to 2.2% from 2.3% in the year to September. Economists polled by Reuters forecast a 0.6% rise in the fourth quarter.

The dollar extended losses against a basket of currencies on the data, while prices for US government bonds were mostly higher. US stock index futures slipped.

Despite the moderate rise in employment costs there are signs of wage growth accelerating as companies seek to retain and attract skilled workers. Minimum pay rises implemented by some states are boosting wage growth.

The Federal Reserve’s latest Beige Book showed wages in some districts being pushed up “a bit” by increases in the minimum wage. Most districts reported that wage pressures had increased.

The Fed said figures from many districts indicated labour markets were expected to “continue to tighten in 2017 with wage pressures likely to rise”. Economists say labour costs needed to rise at least 3% year on year to push inflation closer to the US Fed’s 2% inflation target.

Policymakers and economists see the ECI as one of the better measures of labour market slack and also a better predictor of core inflation.

Wages and salaries, which account for 70% of employment costs, firmed 0.5% in the fourth quarter. They increased by the same margin in the third quarter.

Wages and salaries were up 2.3% in the 12 months to December. That followed a 2.4% gain in the year to September. Benefits for all workers increased 0.4% in the October-December quarter after rising 0.7% in the third quarter.

Source: Business Day

CSN Team

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