U.S. employment costs accelerated in the second quarter from a year ago by the most in this expansion on faster growth in worker pay and benefits, according to Labor Department data released Tuesday.
The employment cost index rose 2.8% year over year, the most since the third quarter of 2008, after 2.7% gain in the prior quarter. ECI climbed 0.6% month over month (compared to estimates of a 0.7% rise ) after 0.8% increase in the prior quarter.
Wages and salaries rose 2.8% year over year, also the biggest gain since the third quarter of 2008; benefits costs jumped 2.9% year over year, the most since the fourth quarter of 2011. Private-sector wages and salaries advanced 2.9% year over year for a second quarter.
The latest results indicate employers are offering better compensation packages to workers amid an ongoing shortage of qualified workers. In another sign of broad-based demand for labor, the ECI showed increases in manufacturing, construction and service-related industries.
While labor costs are rising, there are few signs that they'll trigger heightened inflation pressures. Economists expect the Federal Reserve will still raise interest rates gradually this year.
The government’s quarterly read on the ECI — covering employer-paid taxes such as Social Security and Medicare in addition to the cost of wages and benefits — offers a comprehensive look at how American workers are being compensated.
Average hourly earnings, a separate monthly measure of private-sector wages that can be influenced by shifts in industry employment and hours worked, have been rising moderately in this expansion relative to the strength of the job market.
Employment costs for manufacturers rose 2.9% from a year ago; construction was up 3% and private service providers were up 2.9%. Benefit costs in private industry rose 2.8% from second quarter of 2017, after increasing 2.5% in the prior quarter. Employers’ costs for health benefits increased 1.6% from a year earlier.
