Home ›› 30 Jul 2022 ›› World Biz
US labour costs increased strongly in the second quarter as a tight jobs market continued to boost wage growth, which could keep inflation elevated for a while.
The Employment Cost Index, the broadest measure of labour costs, rose 1.3per cent last quarter after accelerating 1.4per cent in the January-March period, the Labour Department said on Friday.
Economists polled by Reuters had forecast the ECI would rise 1.2per cent in the second quarter. Labour costs surged 5.1per cent on a year-on-year basis after increasing 4.5per 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. It is being closely watched for signs of whether wage growth has peaked as economists and investors try to gauge the pace of the Federal Reserve’s interest rate hikes.
The US central bank on Wednesday raised its policy rate by another three-quarters of a percentage point. It has now hiked that rate by 225 basis points since March.
There have been mixed signals on wages.
While annual growth in average hourly earnings in the Labour Department’s monthly employment report slowed in the first half of the year, the Atlanta Fed’s wage tracker accelerated. The Fed’s “Beige Book” report this month showed that “most districts continued to report wage growth,” and “a quarter of districts indicated wage growth will remain elevated for the next six months.”
