WASHINGTON - Compensation costs for U.S. civilian workers increased as expected in the second quarter, as the Employment Cost Index rose 0.5%, but grew at the slowest pace since early 2010 for the 12-month period ending June 2012, the Bureau of Labor Statistics reported Tuesday.

The median estimate in an MNI survey of economists had centered around a 0.5% increase, with forecasts ranging from a 0.2% rise to an 0.8% increase.

The ECI rose 1.7% year-over-year, less than the 1.9% rise in the previous quarter and the lowest increase since March 2010.

Wages and salaries -- which make up 70% of the index -- rose by 0.4% in the second quarter after a 0.5% increase in Q1. Benefits, making up the remaining 30%, were up 0.6%, a slight improvement over the first quarter.

While civilian wages again saw a year-over-year increase of 1.7%, benefit costs rose at a lesser pace, up 2.1% y/y in the second quarter vs. a 2.7% rise in the first.

Stagnating labor market conditions so far in 2012 were represented in the private industry data, with total compensation rising by 0.5%, a small improvement over the 0.4% climb in Q1. There was a big drop-off on a year-over-year basis, up 1.8% after a 2.1% rise in the first quarter.

Private sector wages and salaries rose by 0.4% in Q2 and grew 1.8% over 12 months, while benefits were up 0.6% in Q2 and rose 1.9% year-over-year -- nowhere near the 2.8% year-over-year increase seen in Q1.

Employer costs for health benefits decelerated over the year to a 2.4% increase, down from the June 2011 increase of 3.6%.

In the state and local government sector, compensation costs were up 0.5% in Q2, down from +0.7% the previous quarter. On a year-over-year basis, compensation was up 1.6%.

Wages were up 0.3% in the second quarter after increasing by 0.4% in the first, and rose by 1.1% vs. June 2011. Benefits rose by 0.9% after a 1.1% increase in Q1, up 2.7% year-over-year.

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