US labour costs increase solidly in second quarter

US labour costs increased solidly in the second quarter as companies raised wages and benefits to attract workers, supporting views that high inflation could persist beyond this year amid supply constraints.

The Employment Cost Index, the broadest measure of labour costs, rose 0.7 per cent last quarter after gaining 0.9 per cent in the January-March period, the Labour Department said on Friday.

That raised the year-on-year rate of increase to 2.9 per cent, the largest gain since the fourth quarter of 2018, from 2.6 per cent in the first quarter.

The ECI is widely viewed by policymakers and economists as one of the better measures of labour market slack and a predictor of core inflation as it adjusts for composition and job quality changes. Economists polled by Reuters had forecast the ECI advancing 0.9 per cent in the second quarter.

Wages and salaries rose 0.9 per cent after shooting up 1.0 per cent in the first quarter. They were up 3.2 per cent year-on-year. Benefits gained 0.4 per cent after rising 0.6 per cent in the first quarter.

The economy is facing a shortage of workers, with a record 9.2 million job openings at the end of May. About 9.5 million people are officially unemployed. Lack of affordable child care and fears of contracting the coronavirus have been blamed for keeping workers, mostly women, at home. There have also been pandemic-related retirements as well as career changes.

Republicans and business groups have blamed enhanced unemployment benefits, including a $300 weekly check from the federal government, for the labour crunch.