THE ECONOMY : 2 Reports Signal Slowdown in Wage Increases

Wages, salaries and other benefits rose 4.5% in the 12 months ending in June, the Labor Department said Tuesday in a report viewed by some economists as a sign that inflationary wage pressures may be peaking.

The department’s employment cost index measures movements in labor costs over the preceding 12 months. For the 12 months ending in March, the last time the index was issued, the increase was 4.6%. That figure was down from a 4.9% increase in the year ending in December.

To some analysts, the two quarters of slightly slower compensation increases showed that labor costs are beginning to moderate in the face of a slowing economy.

The unemployment rate, which dropped to a 15-year low of 5% in March, has climbed to 5.3%. Many economists expect the jobless figure to hit 6% by early next year, reflecting lackluster economic growth in the second half of 1989.

This rising jobless rate will ease tight labor markets and help alleviate inflationary pressures in the economy, these analysts believe.

“The employment cost index shows that the upward momentum in wages has ceased and is beginning to fade,” said Allen Sinai, chief economist for the Boston Co.

In a separate government report Tuesday, the Labor Department said major collective bargaining settlements concluded in the first half of the year featured average wage increases of 3.7% in the first year of the contract, up from 2.1% first-year gains the last time the contracts were negotiated.

Robert G. Dederick, chief economist at Northern Trust Co. of Chicago, said collective bargaining settlements are higher than they were two to three years ago but that they have not jumped sharply in recent months. “Wage increases stopped strengthening toward the fall of last year,” he said. “We have a capping of wage increases with the business slowdown that began earlier this year.”

Since employment costs account for close to 70% of total costs on the industrial side of the economy, any hint of rising wage pressures fuels concerns about inflation.

The 4.5% increase in compensation costs for the 12 months ending in June includes wages and salaries and the costs for such employee benefits as health insurance.

The wage and salary component of total compensation climbed by 4.1% over the past year, while benefit costs rose a faster 5.6%.

Workers in the service sector of the economy fared better than the manufacturing sector in pay gains. Service industries saw wages and salaries increase 4.7% in the past 12 months compared to a 3.2% rise for the manufacturing sector.

However, there was a wide split in the services category. Wages in the transportation sector and communications industry rose just 1.9%, while wages at hospitals shot up 6.4%. Wages climbed 7.6% in finance, insurance and real estate, but this rise was influenced by earnings on commissions.