U.S. labor costs rise moderately in third quarter as wage inflation stays benign
U.S. labor costs increase moderately in the third quarter, signaling continued restraint in wage pressures. The data suggests compensation growth remains stable even as policymakers watch labor market conditions for signs of broader inflation.
Highlights
- The Employment Cost Index rises 0.8% in Q3 after a 0.9% gain in Q2, matching economists' expectations for moderate labor cost growth.
- Labor costs advance 3.4% year-over-year through September, unchanged from the year through June, signaling stable annual wage inflation.
- Benign wage inflation, reflected by stable and slowing ECI growth, may alleviate concerns about compensation-driven price pressures in the U.S. economy.
Third-quarter labor cost data and inflation signal
As reported by Reuters, the Employment Cost Index, the broadest measure of labor costs, rises 0.8% in the third quarter after increasing 0.9% in the April-June period, the Labor Department's Bureau of Labor Statistics says on Friday.The latest increase is in line with economists' expectations, indicating wage growth remains measured rather than accelerating sharply.
Labor costs advance 3.4% in the 12 months through September, unchanged from the year through June.
Implications for policymakers and the labor market
The Employment Cost Index is viewed by policymakers as one of the better gauges of labor market slack and a predictor of core inflation because it adjusts for composition changes and shifts in job quality.The stable annual pace and slower quarterly gain point to benign wage inflation, a factor that could ease concerns about compensation-driven price pressures across the U.S. economy.
In our earlier article on early-career job hopping and wage growth, we explained that economic research often views job switching as a key channel for workers to raise pay and improve long-term job matches. The piece highlighted evidence that frequent moves early in a career can account for a substantial share of lifetime earnings gains, suggesting that reduced labor mobility may dampen wage progression across the broader labor market.
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