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U.S. labor costs rise solidly; wage growth picks up

Posted by: Admin | Posted on: April 30th, 2015 | 0 Comments


WASHINGTON, (Reuters) – U.S. labor costs rose solidly in the first quarter as wages in the private sector increased, which could keep the Federal Reserve on track to raise interest rates this year.

The Employment Cost Index, the broadest measure of labor costs, advanced 0.7 percent – the largest gain since the third quarter of 2014 – after an unrevised 0.5 percent rise in the fourth quarter, the Labor Department said on Thursday.

Economists polled by Reuters had forecast the employment cost index rising 0.6 percent in the January-March period.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack.

Unlike the average hourly earnings (AHE) measure in the employment report, the ECI covers a broad range of workers and is weighted to eliminate composition effects, which economists say have distorted the AHE.

The ECI is seen as a better predictor of core inflation.

Wages and salaries, which account for 70 percent of employment costs, rose 0.7 percent in the first quarter. They had increased 0.6 percent in the fourth quarter.

Private sector wages and salaries increased 0.7 percent, the largest rise since the third quarter of 2014, after gaining 0.5 percent in the prior quarter.

In the 12 months through March, labor costs jumped 2.6 percent, the largest rise since the fourth quarter of 2008. That is still below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed’s 2 percent target.

Labor costs increased 2.2 percent in the 12 months through December.

Private sector wages and salaries were up 2.8 percent in the 12 months through March, the biggest gain since the third quarter of 2008, after rising 2.2 percent in the 12 months through December.

Benefit costs increased 0.6 percent in the first quarter.

They increased 2.7 percent in the 12 months through March after rising 2.6 percent in the 12 months through December.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/3tAa13ognus/story01.htm

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