Economic Report: U.S. employment costs jump again and offer little comfort to Fed in inflation fight

by | Jan 31, 2023 | Stock Market

The numbers: The employment cost index rose a sharp 1% in the fourth quarter, giving little comfort to a Federal Reserve that worries a rapid rise in wages could make it harder to tame inflation. Economists polled by The Wall Street Journal had forecast a 1.1% increase. Labor costs grew more slowly for the third quarter in a row, but they are still rising far faster than the Fed would like.

Compensation climbed at a 5.1% clip in the 12 months ended in December — up from 5% in the prior quarter — to leave the increase in worker pay near the highest level in 40 years. By contrast, wages and benefits rose an average of 2.7% a year from 2017 to 2019. Read: Workers love big raises. The Fed, not so much. Why pay has a big role in the inflation fight. Key details: Wages advanced 1% in the fourth quarter, down from 1.3% in the prior period. They make up about 70% of employment costs. The increase in wages during the 12 months ended in December was unchanged at 5.1%. Benefits increased at a 0.8% pace in the fourth quarter. They make up the rest of worker compensation. The 12-month increase in benefits was unchanged at 4.9%. The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.  The big picture:  Senior Fed officials want to see a tight …

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