Cooling wage growth curbs US labor costs in second quarter
Adds details, housing data, analyst comments throughout
Employment cost index rises 0.9% in second quarter
Labor costs increase 4.1% on annual basis
Wages, salaries gain 0.9%; up 4.2% on annual basis
By Lucia Mutikani
WASHINGTON, July 31 (Reuters) -U.S. labor costs increased moderately in the second quarter as private sector wages grew at the slowest pace in 3-1/2 years, more evidence that inflation was firmly on a downward trend and could help facilitate an interest rate cut in September.
The report from the Labor Department on Wednesday followed data last week showing inflation subsided considerably last quarter, with sub-3% readings in all the measures. Labor costs are likely to cool further as the jobs market continues to ease.
The modest rise in labor costs is likely to be welcomed by Federal Reserve officials who are wrapping up a two-day policy meeting on Wednesday. The U.S. central bank is expected leave its benchmark overnight interest rate in the 5.25%-5.50% range, where it has been since last July.
"Wages and salary increases in private industry are more in line with where Fed officials would like it to be," said Christopher Rupkey, chief economist at FWDBONDS in New York. "The economy is gradually returning to normal. Cooler wages give the green light to Fed rate cuts."
The employment cost index (ECI), the broadest measure of labor costs, increased 0.9% last quarter after rising by an unrevised 1.2% in the first quarter, the Labor Department's Bureau of Labor Statistics said.
Economists polled by Reuters had forecast the ECI would rise 1.0%. Labor costs advanced 4.1% in the 12 months through June, the smallest gain since the fourth quarter of 2021, after climbing 4.2% in the year through March. Annual labor cost growth has slowed from 4.5% in June 2023.
The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes. The U.S. central bank has a 2% inflation target.
"Today's data mark an important step toward the Fed gaining 'greater confidence' that inflation is cooling sufficiently to begin reducing the fed funds rate," said Sarah House, a senior economist at Wells Fargo.
Price pressures are ebbing following 525 basis points worth of rate hikes from the Fed since 2022. The government reported on Tuesday that job openings maintained their steady decline in June and hires dropped to the lowest level since 2020.
Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies, including the yen after the Bank of Japan raised rates to the highest since 2008. U.S. Treasury yields fell.
HEALTH BENEFITS RISE
Wages and salaries, which account for the bulk of labor costs, increased 0.9% last quarter. That was the smallest advance in three years and followed a 1.1% rise in the January-March quarter.
They increased 4.2% on an annual basis, slowing from 4.4% in the first quarter. When adjusted for inflation, overall wages gained 1.2% in the 12 months through June after rising 0.9% in the first quarter. That helped to boost consumer spending and overall economic growth last quarter.
Private sector wages and salaries climbed 0.8%, the smallest advance since the fourth quarter of 2020, after rising 1.1% in the January-March quarter. They increased 4.1% in the 12 months through June after rising 4.3% in the first quarter.
Wages and salaries for union workers increased 6.5%, and rose 3.8% for non-union workers.
The construction industry recorded a quarterly drop in wages, while the gains in manufacturing slowed. In the services sector, solid increases were reported in the retail, finance and insurance and utilities industries.
Wages in the information industry almost stalled and fell in the wholesale trade sector.
The slowdown in wage gains was corroborated by the ADP employment report on Wednesday showing salaries for workers staying in their jobs rising 4.8% year-on-year in July, the smallest increase in three years.
With fewer workers quitting their jobs in search of greener pastures, wage inflation is likely to continue trending lower.
State and local government wage gains also slowed, rising 1.1% after shooting up 1.4% in the first three months of the year. They, however, continued to run higher on an annual basis, advancing 5.1% after increasing 5.0% in the 12 months through March.
Benefits for all workers rose 1.0% after increasing 1.1% in the January-March quarter. They increased 3.8% in the 12 months through June after advancing 3.7% in the first quarter. Health benefits for private workers surged 3.6% on a year-on-year basis after rising 2.8% in the first quarter.
There was some encouraging news on the struggling housing market. A report from the National Association of Realtors showed contracts to buy previously owned homes rebounded 4.8% in June amid improving supply after declining 1.9% in May. This, however, unlikely signals a sharp turnaround as affordability remains a challenge.
Contracts, which lead existing home sales by a month or two, dropped 2.6% in June on a year-on-year basis.
"Elevated mortgage rates and high prices will be headwinds for buyers in the near term," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But rising inventories and lower borrowing costs as the Fed starts to lower interest rates should be positive for home sales over time."
Reporting by Lucia Mutikani; Editing by Paul Simao and Chizu Nomiyama
متعلقہ اثاثے
تازہ ترين خبريں
دستبرداری: XM Group کے ادارے ہماری آن لائن تجارت کی سہولت تک صرف عملدرآمد کی خدمت اور رسائی مہیا کرتے ہیں، کسی شخص کو ویب سائٹ پر یا اس کے ذریعے دستیاب کانٹینٹ کو دیکھنے اور/یا استعمال کرنے کی اجازت دیتا ہے، اس پر تبدیل یا توسیع کا ارادہ نہیں ہے ، اور نہ ہی یہ تبدیل ہوتا ہے یا اس پر وسعت کریں۔ اس طرح کی رسائی اور استعمال ہمیشہ مشروط ہوتا ہے: (i) شرائط و ضوابط؛ (ii) خطرہ انتباہات؛ اور (iii) مکمل دستبرداری۔ لہذا اس طرح کے مواد کو عام معلومات سے زیادہ کے طور پر فراہم کیا جاتا ہے۔ خاص طور پر، براہ کرم آگاہ رہیں کہ ہماری آن لائن تجارت کی سہولت کے مندرجات نہ تو کوئی درخواست ہے، اور نہ ہی فنانشل مارکیٹ میں کوئی لین دین داخل کرنے کی پیش کش ہے۔ کسی بھی فنانشل مارکیٹ میں تجارت میں آپ کے سرمائے کے لئے ایک خاص سطح کا خطرہ ہوتا ہے۔
ہماری آن لائن تجارتی سہولت پر شائع ہونے والے تمام مٹیریل کا مقصد صرف تعلیمی/معلوماتی مقاصد کے لئے ہے، اور اس میں شامل نہیں ہے — اور نہ ہی اسے فنانشل، سرمایہ کاری ٹیکس یا تجارتی مشورے اور سفارشات؛ یا ہماری تجارتی قیمتوں کا ریکارڈ؛ یا کسی بھی فنانشل انسٹرومنٹ میں لین دین کی پیشکش؛ یا اسکے لئے مانگ؛ یا غیر متنازعہ مالی تشہیرات پر مشتمل سمجھا جانا چاہئے۔
کوئی تھرڈ پارٹی کانٹینٹ، نیز XM کے ذریعہ تیار کردہ کانٹینٹ، جیسے: راۓ، خبریں، تحقیق، تجزیہ، قیمتیں اور دیگر معلومات یا اس ویب سائٹ پر مشتمل تھرڈ پارٹی کے سائٹس کے لنکس کو "جیسے ہے" کی بنیاد پر فراہم کیا جاتا ہے، عام مارکیٹ کی تفسیر کے طور پر، اور سرمایہ کاری کے مشورے کو تشکیل نہ دیں۔ اس حد تک کہ کسی بھی کانٹینٹ کو سرمایہ کاری کی تحقیقات کے طور پر سمجھا جاتا ہے، آپ کو نوٹ کرنا اور قبول کرنا ہوگا کہ یہ کانٹینٹ سرمایہ کاری کی تحقیق کی آزادی کو فروغ دینے کے لئے ڈیزائن کردہ قانونی تقاضوں کے مطابق نہیں ہے اور تیار نہیں کیا گیا ہے، اسی طرح، اس پر غور کیا جائے گا بطور متعلقہ قوانین اور ضوابط کے تحت مارکیٹنگ مواصلات۔ براہ کرم یقینی بنائیں کہ آپ غیر آزاد سرمایہ کاری سے متعلق ہماری اطلاع کو پڑھ اور سمجھ چکے ہیں۔ مذکورہ بالا معلومات کے بارے میں تحقیق اور رسک وارننگ ، جس تک رسائی یہاں حاصل کی جا سکتی ہے۔
