Compensation for U.S. workers rose just 0.2 percent in the second quarter, the Bureau of Labor Statistics reported Friday, dashing expectations for a sign that wage gains are finally accelerating.
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Over the last 12 months, employments costs have increased 2% compared with the first quarter rate of 2.6%, marking the slowest rate growth since the second quarter of 2014. Wages and salaries alone also rose 0.2 per cent. The Employment Cost Index is not helping Team Yellen in that search. Compensation for private sector workers was flat in the spring, the first time on record that that category failed to rise. The year before, spending on benefits had increased 2.4 percent.
The report from BLS measures not just salary and hourly wage earnings, but the employer spending on benefits as well.
At 2 percent annually, compensation gains through June are in line with the ceiling for wage increases throughout the recession.
The labour market otherwise appears to be progressing as hiring remains steady.
But the persistent lack of momentum in wage growth suggests slack remains, likely due to the millions of Americans who are jobless or aren’t even looking for work even though they are of prime working age.
Consumer prices were up just 0.1 percent over the year through June, as measured by the Consumer Price Index, thanks in large part to the collapse of oil prices over the past year.
The dollar fell against other major currencies on Friday (Jul 31) after an extremely weak report on US worker pay raised questions about Federal Reserve plans to raise near-zero interest rates this year. That was the smallest gain since the series started in the second quarter of 1982 and followed an unrevised 0.7 per cent increase in the first quarter, Economists polled by Reuters had forecast the employment cost index rising 0.6 per cent.
“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term”, the central bank said in a policy statement.
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The previous quarter had seen annual compensation growth of 2.6 percent, adjusted for seasonal variation, the best number of the recovery and well above previous readings of wage growth. Compensation in goods-producing sectors rose 0.7%.
