US labour costs increased slightly more than expected in the second quarter as private-sector wage growth picked up, though the trend suggested the jobs market was not driving inflation.
The strength in wages reported by the Labour Department yesterday was concentrated in the goods-producing industries. Job growth accelerated between March and May. The momentum, however, fizzled in June. Economists describe the labor market as being stuck in a ‘low hire, low fire’ state.
“Overall, the report highlights that strong job gains in the quarter did not translate into a meaningful increase in wage pressures,” said Priscilla Thiagamoorthy, a senior economist at BMO Capital Markets. “Policymakers will be reassured that, although consumer inflation is still running above the 2pc target, at least cost pressures are not coming from the labour market.”
The Employment Cost Index, the broadest measure of labour costs, climbed 0.9pc last quarter after advancing by the same margin in the January-March quarter, the Labour Department’s Bureau of Labour Statistics said. Economists polled by Reuters had forecast the ECI would rise 0.8 per cent.
Labour costs increased 3.4pc in the 12 months through June after a similar gain in the year through March. 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 changes in job quality.
Wages and salaries, which account for the bulk of labour costs, increased 0.9pc in the second quarter after rising 0.8pc in the January-March quarter. In the 12 months through June, wages rose 3.2pc after advancing 3.4pc in the year through March. When adjusted for inflation, wages fell 0.3pc in the year to June.
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