US labor costs increase solidly in first quarter
2023.04.28 15:30
© Reuters. FILE PHOTO: Construction workers tile a roof, as a subdivision of homes is built in San Marcos, California, U.S., January 31, 2023. REUTERS/Mike Blake/File Photo
WASHINGTON (Reuters) – U.S. labor costs increased solidly in the first quarter as strong wage gains persisted amid a tight labor market, suggesting inflation could remain elevated for a while.
The Employment Cost Index, the broadest measure of labor costs, rose 1.2% last quarter after increasing 1.1% in the October-December period, the Labor Department said on Friday.
Economists polled by Reuters had forecast the ECI rising 1.1%. Labor costs increased 4.8% on a year-on-year basis after advancing 5.1% in the fourth 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.
The Federal Reserve is expected to raise interest rates by another 25 basis points next week, potentially the last hike in the U.S. central bank’s fastest monetary policy tightening cycle since the 1980s. The Fed has increased its policy rate by 475 basis points since March of last year from the near-zero level to the current 4.75%-5.00% range.
Though annual growth in average hourly earnings in the Labor Department’s monthly employment report is slowing, the Atlanta Fed’s wage tracker remains elevated. The Fed’s “Beige Book” report last week noted that “wages have shown some moderation but remain elevated.” There were 1.7 job openings for every unemployment person in February.
Wages and salaries increased 1.2% last quarter after rising by the same margin in the fourth quarter. They were up 5.0% year-on-year after rising 5.1% in the prior quarter.
Private sector wages increased 1.2%, matching the fourth quarter’s gain. They advanced 5.1% year-on-year.
State and local government wages climbed 0.9% after rising 1.1% in the prior quarter. They rose 4.7% year-on-year.
Inflation-adjusted wages for all workers were unchanged on a year-on-year basis after declining 1.2% in the fourth quarter. Benefits increased 1.2% last quarter after rising 1.0% in the October-December period. They increased 4.5% year-on-year.
