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The
Employment Cost Index, the broadest measure of laborcosts,
increased 0.5 percent after rising 0.6 percent in the third
quarter, the Labor Department said on Tuesday.
That slowed the year-on-year rate of increase to 2.2 percent
from 2.3 percent in the year to September. Economists polled by
Reuters had forecast the ECI rising 0.6 percent in the fourth
quarter.
The dollar extended losses against a basket of currencies on the
data, while prices for U.S. government bonds were mostly higher.
U.S. stock index futures slipped.
Despite the moderate rise in employment costs, anecdotal
evidence suggest wage growth is accelerating amid efforts by
companies to retain and attract skilled workers. Minimum wage
increases being implemented by some states are also boosting
wage growth.
The Federal Reserve's latest Beige Book showed wages in some
districts were being pushed up "a bit" by increases in the
minimum wage and that most districts reported that wage
pressures had increased.
The Fed said information from many districts indicated that
labor markets were expected to "continue to tighten in 2017,
with wage pressures likely to rise."
Economists say labor costs need to rise by at least 3 percent on
a year-on-year basis to push inflation closer to the U.S.
central bank's 2 percent inflation target.
The ECI is widely viewed by policymakers and economists as one
of the better measures of labor market slack. It is also
considered a better predictor of core inflation.
Wages and salaries, which account for 70 percent of employment
costs, increased 0.5 percent in the fourth quarter. They
increased by the same margin in the third quarter.
Wages and salaries were up 2.3 percent in the 12 months through
December. That followed a 2.4 percent gain in the year to
September. Benefits for all workers increased 0.4 percent in the
October-December quarter after rising 0.7 percent in the third
quarter.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)
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