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Employment Costs Rise Less Than Expected in Second Quarter
Employment costs rose less than estimated in the second quarter as worker pay raises held steady while benefit gains decelerated, suggesting inflation pressures remain muted.
The employment cost index, a broad gauge monitored by the Federal Reserve, climbed 0.6% from the prior quarter, the slowest increase since the end of 2017, according to Labor Department released data July 31. The gauge increased 2.7% from a year earlier, also a deceleration.
The report shows employers remain hesitant to offer greater wage gains and more generous benefits, even in a strong labor market, suggesting cost pressures within companies are muted.
Compensation gains were broad-based across sectors, though there was some deceleration in service-providing industries, which slowed to a 0.5% pace, the weakest since 2016.
While the headline index is weaker than the projected 0.7% rise seen in Bloomberg’s survey, it’s unlikely to change anything for Fed policymakers expected to lower interest rates July 31 for the first time in a decade.
The data suggest some potential weakness ahead of the government’s monthly employment report due Aug. 2. Economists expect it will show average hourly earnings growth held at a 3.1% annual pace in July as wage pressures remained steady. That gauge has cooled from a 3.4% pace in February that was the highest reading of the economic expansion.
