News
Wages grew more slowly this spring, a sign that inflation could continue to cool
WASHINGTON (AP) — Wages and benefits for American workers grew more slowly in the April-June quarter than in the first three months of the year, a trend that could keep price pressures in check and encourage inflation fighters at the Federal Reserve.
Compensation as measured by the government’s Employment Cost Index rose 0.9 percent in the second quarter, down from a 1.2 percent increase in the previous quarter, the Labor Department said. said wednesday. The number matches last year’s fourth quarter reading as the slowest in about two and a half years. Compared with the same quarter a year earlier, compensation growth was 4.1%, a slight drop from 4.2% in the first quarter.
Higher wages and benefits are good for employees, but slower wage growth will likely reassure Fed officials that inflation is falling steadily toward their 2% target. Rapid wage growth could prompt many companies to raise prices to offset higher labor costs.
However, inflation is also cooling, so wage and benefit growth, adjusted for price changes, has actually accelerated. Inflation-adjusted compensation rose 1.1% year-over-year in the second quarter, up from 0.8% in the previous three months.
The Fed is expected to keep its benchmark short-term interest rate unchanged after its latest policy meeting, which concludes on Wednesday. However, Fed officials are it is also likely to signal that the first rate cut in four years is on the horizon, probably at the next meeting in September.
There were other signs that the labor market is cooling on Wednesday. Payroll processor ADP says its U.S. jobs count, excluding government, rose 122,000 in July, down from a 155,000 increase in June. Its measure of wages rose from a year earlier by a solid 4.8%, but was still the slowest in three years.
“With wage growth slowing, the labor market is playing along with the Federal Reserve’s effort to slow inflation,” said Nela Richardson, chief economist at ADP. “If inflation picks up again, it won’t be because of labor.”