Compensation for workers improved this spring at the highest rate since the Great Recession.
Low unemployment has businesses offering better compensation packages to workers, pushing the employment cost index up to 2.8 percent over a year ago levels, according to a report from the Bureau of Labor Statistics released Tuesday. That is the best annual gain since the third quarter of 2008, which saw the index rise 2.9 percent.
It is only slight gain over the quarterly survey released in March, which indicated a 2.7 percent annual gain. The measure of private-sector wages and salaries, which excludes the costs associated with benefits, rose 2.9% year over year, exactly as it did early in the year. This indicates that wage gains are not accelerating rapidly—something that might convince the Federal Reserve to pick up the pace of interest rate hikes in an effort to keep inflation in line with its target.
In fact, on a quarterly basis, wage gains slowed in the April through June period. Wages rose 0.6 percent compared with the January through March period, less than the 0.8 percent gain in earlier in the year and less than the 0.7 percent growth. So rather than spiraling upward and indicating rising inflation, wage gains appear to have moderated in the second quarter despite the economy growing at a 4.1 percent rate amid very low unemployment.
The gains were broad-based. The employer cost index rose in manufacturing, construction, and services. Compensation for transportation rose 4.0 percent, bolstering arguments that the labor market is tighter in trucking than the broader economy. Compensation in sales and related jobs was up 3.5 percent compared with a year ago. Construction compensation was up 3.2 percent and manufacturing up 2.7 percent.
Wall Street pay was up sharply. Finance and insurance compensation rose 3.8 percent compared with a year ago.
The employer cost index is produced quarterly by the Bureau of Labor Statistics.