Wages, Benefits Rose Modestly in Third Quarter, Report Says
The pay and benefits of U.S. workers rose modestly in the third quarter of the year, the government said Thursday in a report likely to comfort the inflation-wary Federal Reserve.
The Labor Department said its closely watched employment cost index, a broad measure of what employers pay in wages, salaries and benefits, rose 0.9% for the three months ending in September, marginally below the 1.0% increase forecast by economists in a Reuters poll.
If the latest ECI gains are offset by rising productivity, as has been the case recently, Americans should be able to enjoy their fatter wallets without fearing inflation.
The full picture will not be clear until next week, when data on third-quarter productivity and unit labor costs are released. Most economists expect another strong quarter of productivity gains.
“You can’t look at labor costs solely by themselves anymore, it’s only one variable in the inflation equation,” said James Glassman, senior economist at Chase Securities.
The Labor Department also reported that the number of workers filing new applications for state unemployment benefits dropped last week by 5,000, to 305,000.
In recent years, U.S. workers have enjoyed solid wage gains. But those gains have not sparked inflation because they have been offset by dramatic growth in productivity, helped by technology advances, corporate restructurings, deregulation of key industries and rise in global trade.
“We have every reason to believe that productivity growth is still accelerating,” Glassman said. “If we’re not facing a recession, which few people think, there is no reason to think this is going to slow down.”
The third-quarter ECI climb was also lower than the 1.0% increase seen in the April-June period and well below the 1.4% rise seen during the first three months of the year. During the July-September period, wages and salaries climbed 0.8% while benefit costs rose slightly faster, up 1.0%. One sign of possible trouble was that gains in benefit costs on a year-on-year basis increased by 5.3% for the 12 months ended in September, contrasted with a 2.7% year-on-year gain last September.
