The U.S. employment cost index, which provides a comprehensive view of labor costs in the country, increased by 1% in the second quarter, according to the Labor Department. This follows a 1.2% growth in the first quarter. Economists surveyed by the Wall Street Journal had predicted a slightly lower gain of 1.1%.
In the 12 months leading up to June, compensation saw a 4.5% increase, down from the previous quarter’s 4.8% growth.
Wage and Salary Growth
Wages and salaries experienced a minor slowdown in the last quarter, rising by 1% compared to the previous three-month period’s increase of 1.2%. Over the course of a year, wages grew by 4.6%, a decrease from the 5% growth seen in the first quarter.
Benefits Growth
Benefits also saw a modest increase of 0.9% in the second quarter, following a gain of 1.2% in the January-March period. Over the 12-month period, benefits grew at a slightly slower rate of 4.2%, compared to the first quarter’s 4.5% growth.
Analyst Perspectives and Economic Outlook
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, stated that while wages and salaries have decreased from their record highs, they are still rising at a significant pace.
Experts suggest that compensation growth in the range of 3% aligns with the Federal Reserve’s target inflation rate of 2%.
Fed Chair Jerome Powell emphasized the importance of employment cost data in determining future interest rate hikes during his recent press conference.
Market Response
On Friday, stock markets showed an upward trend with DJIA and SPX expected to open higher. Meanwhile, the yield on the 10-year Treasury note TMUBMUSD10Y dropped to 3.97%.
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