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 The Employment Cost Index, the broadest measure of labor costs,
increased 0.6 percent after an unrevised 0.7 percent gain in the
third quarter, the Labor Department said on Friday.
Economists polled by Reuters had forecast the employment cost index
rising 0.6 percent in the October-December period.
The ECI is widely viewed by policymakers and economists as one of
the better measures of labor market slack.
Unlike the average hourly earnings (AHE) measure in the employment
report, the ECI covers a broad range of workers and is weighted to
eliminate composition effects, which economists say have distorted
the AHE.
It is seen as 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 had gained 0.8 percent in the third quarter. The slowdown in
the fourth quarter was flagged by a surprise decline in the average
hourly earnings in December.
The Fed ramped up its assessment of the labor market on Wednesday,
which economists interpreted as a signal for a mid-year rate hike.
In the 12 months through December, labor costs increased 2.2
percent. That is still below the 3 percent threshold that economists
say is needed to bring inflation closer to the Fed's 2 percent
target. Labor costs had increased 2.2 percent in the 12 months
through September.
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Wages and salaries were up 2.1 percent in the 12 months through
December after a similar gain in the 12 months through September.
Benefit costs increased 0.6 percent in the fourth quarter. That
followed a similar gain in the July-September period.
They increased 2.6 percent in the 12 months through December, the
largest jump since March 2012, after rising 2.4 percent in the 12
months through September.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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