Wages Outpace Inflation; Sales of Homes Rise : Economy: Despite the 4.1% rise in pay and the 7.4% increase in new-home sales, consumer confidence remains shaky.

Americans’ wages and salaries rose at an annual rate of 4.1% the past three months as paychecks grew faster than inflation for the second straight quarter, the government said Tuesday.

It was the first time since 1986 that Americans enjoyed back-to-back wage gains outpacing increases in the cost of living, the Labor Department reported.

Analysts said the improved buying power could help buoy an economic recovery.

In other bright news, new-home sales resumed their rebound, jumping 7.4%. Sales advanced in every region except the South, where they slipped 0.5%, according to the departments of Commerce and Housing and Urban Development.

On a negative note, a survey on consumer confidence found that Americans remained uncertain about the economy in July, an indication that the recovery may be far from robust.

The Conference Board, a business-supported research group, said its consumer confidence index registered 77.7 in July, down slightly from 78.0 in June.

The economy, in a recession since last summer, started growing again in the April-June quarter, but only at a modest annual rate of 0.4%.

The Labor Department’s employment cost index showed that wages and salaries paid by private industry during that period grew 1%, or at annual rate of 4.1%.

That means workers’ wages rose faster than the cost of living, because inflation during those three months ran at an annual rate of 2.8%.

Workers’ wages were also ahead of inflation in the first quarter of 1991. It marked the first time since 1986 that wages for two consecutive quarters grew faster than consumer prices, the department said.

“If wages can stay ahead of inflation, that could help sustain our expansion . . . by giving workers more money to spend without having to borrow or dip into savings,” said Allen Sinai, chief economist at Boston Co.

“The report shows pluses everywhere. . . . There is a very tough-minded business sector in terms of cutting costs (and) workers are doing better,” Sinai said.

The overall employment cost index, which measures both wages and benefits, rose 4.6% for the 12 months ending in June, a slower advance than the 5.4% increase for the year ending in June, 1990.

The overall index counts workers in government and private industry.

Benefit costs, which include rocketing health-care premiums, jumped 6% for the year ending in June, while wages and salaries rose 4%, the government said.

Some analysts were worried about the overall 4.6% increase in employment costs, noting that the index is considered a key gauge of inflationary wage pressures and is watched closely by the Federal Reserve.

The Bush Administration has kept up pressure on the central bank to spur economic demand by lowering interest rates.

“It’s bad news for the economy because that benefit cost gets embedded in that core rate of inflation and there’s no doubt the Fed worries about that number,” said Jack Albertine, who heads an economic forecasting firm in Washington.

The report on home sales was encouraging to analysts because it showed that sales of single-family homes are on the rise again after a one-month pause. Since hitting what analysts called a bottom in January, home sales have increased every month except May.

New-home sales totaled a seasonally adjusted annual rate of 525,000, up from a revised 489,000 rate in May.

“New-home sales continue to be one of the bright spots in the economy. . . . The rebound is essentially bringing home sales back up to near where they were before the Persian Gulf crisis,” Sinai said.

The monthly survey of 5,000 households found consumers slightly more pessimistic than they were in June about business conditions for the next six months.

Consumer spending is considered key to any recovery because it makes up about two-thirds of the nation’s economic activity.

A separate Labor Department report Tuesday showed that workers covered by collective bargaining contracts settled from April through June provided for annual wage gains averaging 3.4% over the life of the pact.

That was an improvement over the 2.5% annual gains of the settlements that the new contracts replaced.

The Economy Consumer Confidence Index From a monthly survey of 5,000 households 1985 equals 100 January* 1991: 77.7 *Preliminary figures

New Home Sales Seasonally adjusted annual rate, thousand of units June, ‘91: 525 May, ‘91: 489 June, ‘90: 549 Source: Commerce Department