US em­ploy­ment costs grew slower in Q2

Kuwait Times - - BUSINESS -

Wages and ben­e­fits paid to US civil­ian work­ers grew more slowly in the sec­ond quar­ter. The La­bor Depart­ment said Fri­day to­tal com­pen­sa­tion was up 0.5 per­cent in the April-June pe­riod, com­pared to 0.8 per­cent growth in the first quar­ter.

Wages and salaries, which ac­count for 70 per­cent of com­pen­sa­tion costs, also rose 0.5 per­cent. Ben­e­fit costs, which cover pen­sions and health in­sur­ance, in­creased 0.6 per­cent.

The slight slow­down in the sec­ond quar­ter likely means the Fed­eral Re­serve won’t be wor­ry­ing about wage growth ris­ing too quickly. In­deed, the Fed has ex­pressed con­cern re­cently that in­fla­tion has fallen far­ther from its 2 per­cent an­nual tar­get. Nor­mally, solid hir­ing drives up wages and prices.

But earlier this week, the Fed kept its key in­ter­est rate un­changed and said in­fla­tion has stayed un­de­sir­ably low even though the job mar­ket keeps strength­en­ing. Too-low in­fla­tion can slow eco­nomic growth by caus­ing peo­ple to de­lay pur­chases if they think they can buy a prod­uct for a lower price later.

De­spite this quar­ter’s slower in­crease, the Em­ploy­ment Cost In­dex has shown steady im­prove­ment as the un­em­ploy­ment rate has fallen to 4.4 per­cent. “We still ex­pect la­bor costs to ac­cel­er­ate in the quar­ters ahead,” said Joshua Shapiro, an econ­o­mist with MFR, Inc. “How­ever, given that re­cent data on this front have been much tamer than mod­els an­tic­i­pate given the low un­em­ploy­ment rate, fore­casts of ac­cel­er­a­tion are not likely to prove suf­fi­cient for mone­tary pol­i­cy­mak­ers.”

In the past year, salaries and ben­e­fits have risen 2.4 per­cent. That matches the in­crease for the 12 months end­ing in March 2017, but is be­low the roughly 3.5 per­cent gen­er­ally con­sid­ered con­sis­tent with a healthy econ­omy. Com­pen­sa­tion for state and lo­cal gov­ern­ment work­ers grew 0.5 per­cent, com­pared to the pre­vi­ous quar­ter’s gain of 0.6 per­cent.

Among pri­vate sec­tor work­ers, com­pen­sa­tion also rose 0.5 per­cent, com­pared to 0.8 per­cent in the first quar­ter. Pri­vate in­dus­try work­ers em­ployed in main­te­nance, tech­nol­ogy, fi­nan­cial and in­sur­ance fields saw the strongest wage and ben­e­fit growth. US em­ploy­ment costs grew slower in sec­ond quar­ter.— AP

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