Wages Rose 4.2% in Past 12 Months, U.S. Reports

Wages and salaries in the private sector, a closely watched barometer of inflation, rose a modest 4.2% in the latest 12 months, the Labor Department reported Tuesday.

Among those with the heftiest increase were such service areas as health care, wholesale trade, finance, insurance and real estate.

The increase for the 12 months that ended in March was the largest in 3 1/2 years, but went up only slightly from a gain of 4.1% in January-December, 1988, according to the employment cost index, which is issued quarterly. Wages and salaries rose 3.3% in the 12 months that preceded March, 1988.

The report may provide assurance to the Federal Reserve Board, which has been raising short-term interest rates for the past year to combat inflation. The Fed is concerned that once wages respond decisively to higher prices, inflation becomes rooted in the economy and is more difficult to control.

Inflation until recent months had been widely considered to be proceeding at only a moderate pace, compared to the high inflation years of 1979 and 1980. But both the consumer price index and the producer price index have been moving noticeably higher in 1989 in large part because of a climb in energy and food costs.